- Stock buying app Public.com is raising another $200 million at a $1 billion “pre-money” valuation, sources tell Insider.
- The valuation is at least 4x higher than the company’s last, when it raised funds in December.
- Interest in the company surged after last month’s Robinhood and GameStop trading controversy.
- Visit the Business section of Insider for more stories.
Investors are scrambling to grab stakes in another hot fintech startup, Public.com, a stock buying app and competitor to Robinhood.
The startup, which offers a zero-fee trading app that doubles as an online investing community, is raising around $200 million in a financing round led by Tiger Global Management at a $1 billion “pre-money” valuation, according to two people familiar with the discussions. That means Public.com could be valued at about $1.2 billion “post-money.”
However, this valuation is not finalized because the round is still ongoing, and Public.com could decide to raise even more than $200 million, sources say. (A pre-money valuation refers to the value private investors assign to the company before they invest. The post-money valuation refers to the value after the new investment.)
Spokespeople for Public.com and Tiger Global Management had no comment on the deal.
The most jaw-dropping part of the round is that the $1 billion-plus valuation is at least four times what the startup was valued just two months ago, when it raised a $65 million Series C round in December, sources said.
Tiger Global is leading the round with a $100 million investment and venture firm Accel, which led Public.com’s three previous rounds, is participating. Other investors are now scrambling to grab some of the remaining allocations for the round — meaning they are vying to buy shares — which is expected to close soon, the two people said.
The frenzied investor interest in Public.com comes only weeks after day traders banded together to spike the share price of video game retailer GameStop, fueling billions of dollars in losses for short sellers.
The situation made national news, and Robinhood faced an onslaught of criticism after it halted trading of GameStop and other volatile stocks for a short period.
As a competitor, Public.com benefited from the controversy. New downloads of its app on the iOS store increased more than sixfold on January 28 alone, the day Robinhood implemented the trading restrictions, according to data from app analytics platform App Annie.
The new financing will help the fintech handle its rapid growth.
But investors speculated to Insider that Public.com is especially keen on receiving the cash because it no longer makes money from “payment for order flow” (PFOF), the controversial process that Robinhood relies on to generate revenue.
PFOF is when “market makers” pay a brokerage like Robinhood to execute the stock orders submitted by individual investors. These market makers make money by pocketing the difference between what the buyer pays for the stock and a possibly better price they can find.
Public.com said it would no longer accept payment for order flow on February 1, following heightened criticism of the practice from prominent investors and politicians.
To make up for the lost revenue, the company introduced a tipping feature customers can use when performing a trade. It also said it may roll out premier paid subscription services in the future.
Public.com is riding a boom in stock investing
Public.com was cofounded by Jannick Malling, Matt Kennedy, Peter Quinn, and Sean Hendelman in 2019. Malling, whose first startup was the online trading platform Tradable, is now Public.com’s CEO, and Kennedy’s focus is customer success. Quinn and Hendleman have since left Public.com, according to their LinkedIn profiles.
The fintech startup closed its first funding round in March 2019, raising $9 million in a deal co-led by Accel and Greycroft.
Public.com launched out of beta in September of that year, offering a trading platform that also allowed users to share their stock portfolios and discuss investing strategies.
Public.com grew steadily in 2020, averaging 30% month-over-month growth, according to a company press release. The growth came from a broader boom in stock trading, buoyed by the rise of commission-free apps, low-fee brokerages, and a bullish stock market that defied much of the pandemic-induced economic downturn.
Public.com also raised two other rounds of financing last year. Accel and Greycroft co-led a $15 million investment in March, and Accel led the $65 million round in December.
Venture firms like PLG Ventures and Cantos Ventures nabbed stakes in Public.com, as did music duo The Chainsmokers, NFL player J.J. Watt, soccer star Keisuke Honda, and professional skateboarder Tony Hawk.
Tiger has become a major force in venture
Even before the GameStop saga, venture firms were reaching out to Malling and co-CEO Leif Abraham, eager to build a relationship that they hoped would help them secure investments in Public.com’s future financing rounds, Insider learned.
Still, the fact that Tiger Global Management won the lead was not a surprise to investors briefed on the deal. The $42 billion hedge fund-turned-investment firm has become a force in the venture capital world in the past couple of years.
Tiger, for example, led Checkout.com’s $450 million Series C round earlier this year at a $15 billion valuation, making the payments company Europe’s most valuable startup. And it also wrote the lead check in Oscar Health’s $140 million funding round in December. The health insurance company just filed to go public this month.
Tiger Global also invested $250 million in Robinhood at the end of January, the Wall Street Journal reported, giving the investing giant stakes in two competing fintech startups.
Such investments reflect a growing trend of hedge funds pursuing late-stage startups, sometimes bidding up the price of rounds, making it more difficult for traditional venture firms to win competitive deals, multiple investors told Insider. A similar dynamic is taking place in seed rounds, where bigger venture firms are becoming more active and spiking early-stage startup valuations.
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