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Andrew Harrer / Bloomberg
Robinhood Markets announced on Monday that it had raised $ 200 million from D1 Capital Partners, raising the company’s valuation to $ 11.2 billion from $ 8.6 billion just last month.
It is Robinhood’s third funding round of 2020, and comes after the online broker jumped competitors in terms of customer growth and day-to-day operations during the pandemic. Robinhood pioneered zero-commission investing, a business model that its competitors have now adopted.
D1 Capital Partners, managed by long-time hedge fund manager Dan Sundheim, is a new investor in Robinhood. It joins major venture capital firms and celebrities like Ashton Kutcher in stealing money in Robinhood.
The company says it will put the money into improving the customer experience and expanding its core product. The number of daily trades on the platform has more than doubled between the first and second quarters, outpaces companies such as TD Ameritrade (ticker: AMTD) and Charles Schwab (SCHW) with much longer history. The $ 11.2 billion valuation robots Robinhood closer to its rivals.
Morgan Stanley (MS) agreed to buy E * Trade Financial (EFTC) for $ 13 billion this year, Schwab buys Ameritrade in a deal worth $ 26 billion, while Interactive Brokers Group (IBKR) has a market of $ 22 billion.
Robinhood users tend to be younger than those at other companies, and analysts say they invest less money on the platform.
“We are proud that more people than ever are using Robinhood to learn how to invest and manage their finances,” co-founder and co-CEO Vlad Tenev said in a statement. “We remain laser-focused on delivering the best product and customer experience and democratizing finance for all.”
Read more: How Robinhood took the moment in stock trading
Robinhood executives say they are spending money to prevent some of the problems that affected users this year – most notably, Robinhood was more than a day into March when the market gyrated. Some users have told Barron’s that the unpredictability of the app made them question whether they would continue to use it.
Robinhood has also hired more customer service representatives to interact with customers via email following the suicide in June of a 20-year-old who in his suicide note said he was saddened by a trade on the app. And Robinhood has recently increased its presence in lobbying in Washington, DC, as members of Congress raise questions about whether the company encourages risky trade among young people.
Write to Avi Salzman at [email protected]
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