Supreme Court agrees to take up Robinhood public offering lawsuit

The Supreme Court agreed on Friday to hear an appeal by Robinhood to block a class-action lawsuit from investors.

The Dispute

Robinhood wants the high court to overturn a decision by the 9th Circuit U.S. Court of Appeals. That lower court ruling brought back a lawsuit filed by investors against Robinhood and firms involved with its initial public offering, including Goldman Sachs and J.P. Morgan Securities. A San Francisco federal court judge had earlier dismissed the case. The Trump administration and the Securities and Exchange Commission both urged the Supreme Court to take up the appeal. A Robinhood spokesperson said the company is pleased the court agreed to hear the case and looks forward to presenting its argument. CNBC requested comment from the attorneys representing the plaintiffs.

Background

Robinhood held its public offering in July 2021 following a surge in investor interest during the Covid-19 pandemic involving meme stocks and the crypto asset Dogecoin. The 9th Circuit panel noted that the registration statement for the offering contained only limited information about the company's performance during the second quarter of 2021. After the offering, Robinhood reported financial results from that quarter, and its stock price dropped. Investors then sued the company and other defendants, claiming the registration statement left out required financial data.

Context

Initial public offerings involve strict legal rules requiring companies to share clear and complete financial details with potential buyers before they purchase shares. Disputes like this typically arise when stock prices drop sharply soon after a public offering, leading investors to claim they were not given all the necessary facts to make an informed choice.