Court clears Robinhood of misleading investors before its IPO
A group of shareholders sued investment platform Robinhood last year.
The backstory: A group of shareholders sued investment platform Robinhood last year, saying the brokerage misled investors ahead of its initial public offering (IPO)in 2021. They said that Robinhood hid important information about its financials and growth potential from the public, pointing to a "severe deterioration" in things like its active users, revenue, assets and other key metrics. They also highlighted a huge drop in crypto trading volume and a plunge in Robinhood's stock price from US$38 to US$6.81.
The development: The judge in the case didn't see things their way. US District Judge Edward Chen in San Francisco ruled that Robinhood's disclosures ahead of the IPO were accurate enough and that the drop in key metrics wasn't out of the ordinary. The judge also dismissed the claims against Robinhood's CEO Vladimir Tenev, his team and the big banks like Goldman Sachs and JPMorgan, who helped with the IPO underwriting.
"Plaintiffs thus failed to plead that Robinhood did not disclose 'material factors' that would make an investment in Robinhood speculative or risky," said US District Judge Edward Chen.
"Looking back over the past year, I'm incredibly proud of the tremendous execution of our team on our 2022 product roadmap. We're now starting to see meaningful traction on a number of the products we launched, which gives us confidence they can grow into significant business lines over time," said Vlad Tenev, Robinhood co-founder and CEO, in an earnings release this month.
"We believe it will be accretive over time and removes a distraction for shareholders," said Vlad Tenev, Robinhood chief executive, on an earnings call last week, referring to a plan to buy back stock seized from FTX founder as a sign of its confidence in its future.