Robinhood Markets, Inc.
The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Northern District of California on behalf of those who acquired Robinhood Markets, Inc. (“Robinhood” or the “Company”) (NASDAQ: HOOD) securities pursuant and/or traceable to the Company’s initial public offering conducted in July 2021 (the “IPO”). Investors have until February 15, 2022 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
Robinhood is a financial services company known for pioneering commission-free trades of stocks, exchange-traded funds (“ETFs”) and cryptocurrencies via a mobile app.
On or about July 30, 2021, Robinhood conducted its IPO , offering 55 million shares of its common stock to the public at a price of $38 per share (the “Offering Price”) for anticipated proceeds of over $2 billion.
On October 26, 2021, after the markets closed, Robinhood reported its third quarter 2021 financial results, revealing that its total net revenue for the period between July 1, 2021 through September 30, 2021 — the same period during which the Company conducted its IPO — came in at $365 million, badly missing analyst estimates by nearly $73 million, and declines in its monthly active users (“MAUs”), funded accounts, assets under custody (“AUC”), and average revenue per user (“ARPU”). Robinhood also disclosed that third-quarter transaction-based revenue from cryptocurrency trading, which in the lead up to the IPO had been the bulk of the Company’s revenues, was a measly $51 million, staggeringly below the $233 million Robinhood earned from crypto trading in the second quarter. On this news, Robinhood’s stock price declined by $4.13 per share, or approximately 10.44 %, from $39.57 per share on October 26, 2021 to close at $35.44 per share on October 27, 2021.
On November 8, 2021, after the markets closed, Robinhood disclosed that it had suffered a “data security incident” on November 3, 2021, admitting that an “unauthorized third party” had obtained email addresses for approximately five million users and the full names of a different group of about two million users, indicating that the attack potentially affected nearly 40% of Robinhood’s MAUs. What is more, Robinhood said the additional personal information of 310 other users, including their names, dates of birth, and zip codes, were exposed, and within that group, that 10 users suffered even “more extensive” breaches. On this news, Robinhood’s stock price declined by $1.28 per share, or approximately 3.37%, from $37.98 per share on November 8, 2021 to close at $36.70 per share on November 9, 2021.
The lawsuit alleges throughout the Class Period, Robinhood’s registration statement and prospectus used to effectuate its IPO contained representations that were materially inaccurate, misleading, and/or incomplete because they failed to disclose that, at the time of the IPO, Robinhood’s revenue growth was experiencing a major reversal, with transaction-based revenues from cryptocurrency trading serving only as a short-term, transitory injection, masking what was actually stagnating growth. In addition, the Company’s “significant investments” in enhancing the reliability and scalability of its platform were patently inadequate and/or defective, exposing Robinhood to worsening service-level disruptions and security breaches, particularly as the Company scaled its services to a larger user base.