Robinhood Markets, Inc. has been in the news recently for a variety of reasons, and on July 28, 2021, the company made headlines again, this time for its initial public offering (IPO). While the IPO itself was noteworthy, what was maybe more attention grabbing was the fact that Robinhood’s registration statement (Form S-1), filed with the U.S. Securities and Exchange Commission prior to its IPO, included over 75 pages of risks and uncertainties to be considered by investors.
The risks specifically mentioned in Robinhood’s S-1 filing include, among others:
- Limited operating history
- Rapid growth
- Historical operating losses
- Potential regulation
- Harm to brand and reputation
- Attraction and retention of highly skilled personnel
- Ability to keep up with industry and technological changes
- Reliance on third parties
- Cybersecurity and data privacy
- Protection of intellectual property
To be certain, the risks faced by Robinhood investors affect the price they are willing to pay – the more risk there is, the greater the required return and the lower the price.
While your company may be in a different industry, the price an investor or acquiror is willing to pay for your business will be affected by the risks it faces. Has your company experienced rapid growth with limited operating experience? Is the protection of intellectual property crucial to your business? Is the technology your business relies upon changing rapidly? Do you feel the pinch of a labor shortage? If you are looking to maximize the value of your company, start by identifying the risks your company faces and developing a strategy to mitigate those risks. Beginning the process early, years before selling your business, is key, as mitigating risks is often not accomplished quickly.
We’re Here to Help
Bennett Thrasher’s Valuation practice is here to assist you in evaluating and responding to potential risks relevant to your company, helping you achieve your strategic business objectives and building a personalized exit plan. To learn more about these services, contact Gina Miller or Brett Dixon by calling 770.396.2200.