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The Daily Pitch: VC

August 24, 2020

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Robinhood's no-fee path toward an IPO

Robinhood co-founder and co-CEO Vladimir Tenev
(Noam Galai/Getty Images)

Robinhood has been on the money with its no-fee stock-trading model, and the company's recent growth could bring the opportunity for an IPO in the next 12 to 18 months. Investor interest in the trading app has been surging: The company has reached a valuation of over $11 billion and has more user accounts than most traditional competitors in the retail trading market.

In our latest research note, Robinhood Shifts Trading to the Masses, PitchBook analysts take a deep dive into the company's history, market and strategy, with findings including:

While Robinhood pioneered no-fee trades, it relies on a diversified revenue stream
The discount brokerage fintech company may be poised for aggressive expansion into new offerings
The company has benefited from nontraditional marketing campaigns focused on younger investors

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Vista Equity's Robert Smith faces federal tax probe

Vista Equity Partners founder Robert Smith is under scrutiny for an offshore fund that has drawn the attention of the IRS.
(Astrid Stawiarz/Getty Images)

Robert Smith, the billionaire co-founder of private equity firm Vista Equity Partners, is under federal investigation on questions over tax compliance involving $200 million in assets moved through offshore entities, according to Bloomberg.

Investigators are probing whether Smith was the beneficial owner of Caribbean entities that received proceeds from his firm's first buyout fund. Some of those funds eventually made their way to a US charitable organization founded by Smith, Bloomberg reported.

The billionaire has reportedly been pushing to reach a civil settlement with prosecutors rather than face conviction and possible jail time. He may have even discussed cooperating with a separate tax probe of his former associate, Robert T. Brockman. Prosecutors have yet to formally file any charges against Smith or determine whether he owes money, according to Bloomberg.

Smith has become one of the most visible philanthropists in the US over the past few years as his net worth skyrocketed to more than $5 billion, according to the latest Forbes estimate. In 2019, he pledged to pay off the student debt of graduating seniors at Morehouse College, which was estimated to cost some $40 million.

Related read: Vista founder Robert Smith to pay off student loans for Morehouse grads

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Profit eludes Palantir as market debut nears

Investors have reportedly glimpsed the financials of Palantir, the highly secretive data analytics software company that confidentially filed to go public in July.

The financials show that the company's revenue in 2019 was around $742 million, about a 25% jump from the year before, according to reports. Meanwhile, Palantir is said to have posted a $580 million net loss in 2019, about the same as 2018. In the first six months of 2020, the company took in $488 million of revenue, with that amount expected to be greater in the latter half of this year, according to Bloomberg.

Palantir has reportedly remained unprofitable since it was launched in 2003 by Peter Thiel and other Silicon Valley stalwarts. It recently relocated its headquarters to Denver from Palo Alto.

The company plans to go public via a direct listing, but it's imposing a 180-day lockup period—a provision shareholders don't typically see in a direct listing—that will allow them to immediately sell 20% of their stock, according to The New York Times. However, the shareholders will have to wait until the lockup period expires to sell more shares, the report said.

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Recommended Reads

A veteran of Norges Bank and the University of California's investment office offers lessons on the order and consequences that follow catastrophe. [Institutional Investor]

The coronavirus is turning college football into football without college. [The Wall Street Journal]

Two British orthodontists have an unusual theory about the source of crooked teeth—one that's earned them a following in some of the darkest corners of the internet. [The New York Times]

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