Robinhood seeks $1B IPO for fund offering private market access

Robinhood Markets Inc. is planning to raise $1 billion through the initial public offering of a closed-end fund designed to provide US retail investors exposure to private companies.

The Menlo Park, California-based brokerage is offering 5 million shares of Robinhood Ventures Fund I, while the fund itself will sell 35 million shares priced at $25 each, according to a company statement.

Investors using Robinhood’s platform could request IPO shares from Feb. 17, with trading expected to start Feb. 26, according to a marketing presentation.

The launch comes as enthusiasm builds around high-profile private firms, including billionaire Elon Musk’s SpaceX, which is nearing a public listing that could raise as much as $50 billion.

Investment products offering pre-IPO exposure have gained popularity as retail investors seek opportunities previously limited to wealthy individuals and institutional investors.

Robinhood’s fund already holds stakes in potential IPO candidates such as AI software firm Databricks Inc., smart ring maker Oura Health OY and UK fintech company Revolut Ltd., and it has agreed to invest in payments firm Stripe, according to an earlier filing with the US Securities and Exchange Commission.

Structure and risks of closed-end funds

Closed-end funds provide one route for retail investors to participate in private company growth, especially as many startups remain private longer and valuations rise.

However, the structure carries complexities.

Unlike mutual funds, closed-end funds do not continuously issue or redeem shares, allowing their market price to trade at a premium or discount to the value of underlying assets.

Since 2019, 46 new closed-end funds have launched, according to CEF Advisors data.

This year also marked the first such IPO since 2022, which raised only $53 million, underscoring a muted fundraising environment.

High-profile attempts have faced challenges; billionaire Bill Ackman previously sought to raise $5 billion for a US-listed closed-end fund after shelving a larger plan due to weak demand.

Expanding access to pre-IPO companies

Robinhood has increasingly pursued ways to broaden retail participation in private markets.

In June, the company introduced tokenized equities in Europe and ran a limited giveaway of equity tokens tied to OpenAI and SpaceX.

Robinhood Ventures Fund I plans to invest in at least 10 private companies, with no single holding exceeding 20% of assets.

Additional capital beyond initial investments will be directed toward new portfolio holdings, according to the marketing presentation.

The fund will not pay regular dividends and would only distribute cash if excess funds become available, Chief Financial Officer Shiv Verma said.

There will be no minimum investment requirement and no performance fee, while the 2% management fee will be reduced to 1% for the first six months after the IPO.

The fund may also invest in special-purpose vehicles that could charge management or performance fees.

Chief Executive Officer Vlad Tenev expects the fund to begin trading on Feb. 26, with Goldman Sachs Group Inc. leading the offering.