Robinhood told users on Tuesday it had abandoned plans to expand in to the UK, marking the second time the popular free stock-trading app has failed to launch outside the US.
The San Francisco-based group had originally planned to launch in the UK early this year, but in June removed any definitive timeframe. On Tuesday, the company said in emails to 250,000 users that had signed up to open a UK account that it had scrapped efforts to launch.
Since coronavirus struck, Robinhood has latched on to a boom in retail investing in the US that has attracted hundreds of thousands of investors to financial markets for the first time, hoping to ride a 45 per cent rally in stocks since the lows in March. But this formula has proven tough to replicate overseas.
“We’re saddened to share that we’ve made the difficult decision to postpone our UK launch indefinitely,” the company said. “We’ve come to recognise that our efforts are currently best spent on strengthening our core business in the US.”
The company will take down its UK website and transfer the bulk of its London-based staff to work on projects to support its US operations, according to a person familiar with the plans.
The decision marks the second time the group has put plans on hold to expand beyond the US. In 2015, the company announced it would open in Australia, but never did.
This year, the company secured $600m in equity fundraising, giving it a valuation of $8.6bn — up from the $7.6bn it achieved in its previous round in 2019.
Robinhood has shaken up the US retail trading industry since its launch as a zero-fee platform in 2015. That aggressive pricing structure — which requires the company to make money from selling customer orders to market makers, investing cash balances and charging for margin loans — prompted rivals such as Charles Schwab and E-Trade to eliminate trading commissions last year.
In February, the company’s systems suffered a series of outages, separating its users from the markets during some of the most volatile trading days of the year. Aggrieved traders have since mounted a class-action lawsuit to redeem their losses.
Some critics have also flagged the risks of offering sophisticated tools such as options trading to young and inexperienced investors. Last month 20-year-old Alex Kearns took his own life after apparently believing he had lost more than $700,000 in an options bet on Robinhood’s platform. His account was actually $16,000 in credit — but Kearns may have misread the total potential loss of one side of the options trade as his balance. Robinhood said it would change the way it displays user information after the death.
In the UK, Robinhood would have come up against local players such as Revolut, Freetrade and Trading 212. All offer free trades and have mimicked Robinhood’s slick interface and marketing aimed at millennial users.