Robinhood Files For 97.9M-Share Common Stock Offering: What Investors Need To Know

Shares of newly listed trading app Robinhood Markets, Inc. HOOD, which experienced considerable volatility earlier this week, were moving to the downside Thursday. Here's why. 

What Happened: Robinhood filed with the SEC a preliminary prospectus on Form S-1 for offering up to 97.876 million shares of its Class A common stock.

These shares will be offered by selling shareholders following the automatic conversion of certain convertible notes held by selling stockholders in connection with the initial public offering.

The convertible notes were issued by Robinhood in a prior private placement transaction prior to its IPO.

The company clarified that it will not receive any proceeds from the sale of the shares through the offering. The selling shareholders may sell any or all of the securities offered, the company said. 

The selling stockholders, the brokerage said, are investors who have had no position, office, or other material relationship with it or any of its affiliates within the past three years.

New Enterprise Associates will be allowed to offload maximum shares, representing about 10.4% stake. Following the offering, only Andreessen Horowitz, D1 Master Holdco I and Thrive Capital, among the selling shareholders, will hold over 1% stakes.

Related Link: Robinhood App Review

Why It's Important: Robinhood made a forgettable debut on the Nasdaq last Thursday. The shares opened for trading at the IPO price of $28 and moved in a $33.35-$38 range before ending lower at $34.82.

Robinhood shares began picking up momentum Tuesday, as they settled above the IPO price at $46.80. On Wednesday, the stock experienced significant volatility and was halted for trading a few times. After moving in a $54.40-$85 range, the stock settled at $70.39 amid frenzied buying by retail investors.

The news of the proposed stock sale is likely to exert downward pressure on the shares given the additional supply that will come online.

HOOD Price Action: In premarket trading, the stock was down 7.96% at $64.79. 

Related Link: Robinhood's IPO Access Product Allows Retail Investors To Buy IPO Shares