The pandemic increase in meme shares and crypto helped Robinhood pull in $7.5 million in earnings on $959 million in income for 2020 , in response to its S-1 filing with the SEC that laid out the corporate’s financials for the primary time forward of its IPO (preliminary public providing) later this yr. Robinhood intends to boost as much as $100 million as a part of its IPO course of, and can checklist its shares on the Nasdaq underneath the ticker image HOOD.
The submitting additionally drills down on Robinhood’s crypto enterprise. The corporate noticed an unlimited improve within the quantity of Bitcoin and different crypto funds it holds on behalf of consumers. That quantity reached almost $11.6 billion by March 31 this yr, up from the $480 million it held a yr earlier than.
The submitting famous that, for the primary quarter of 2021, 17% of Robinhood’s total income got here from crypto buying and selling—and that 34% of that (round 6% of the entire) got here from Dogecoin. Robinhood described this case as a threat if “demand for transactions in Dogecoin declines and isn’t changed by new demand for different cryptocurrencies.”
Extra broadly, the submitting confirmed that, whereas Robinhood earns cash from different strains of enterprise resembling “Gold” accounts, the overwhelming majority of its income comes from prospects’ buying and selling actions. Whereas cryptocurrency buying and selling now makes up 17% of that income, the lion’s share comes from prospects’ buying and selling shares and choices.
Robinhood’s IPO will come as a landmark monetary occasion given how the buying and selling app has grow to be an iconic model amongst millennials. Since launching in 2013, Robinhood has launched tens of millions to the world of investing whereas upending the standard brokerage business with a slick app and 0 fee buying and selling mannequin.
Robinhood has additionally made itself a serious participant in crypto—9.5 million of its customers traded crypto on the platform within the first quarter of 2021—and is poised to emerge as a critical rival to Coinbase within the coming years. (Sources near Coinbase have instructed Decrypt that the corporate views Robinhood, versus every other pure-play crypto firm, as its largest aggressive menace.)
Robinhood’s crypto choices, which embrace Bitcoin and Dogecoin, are at the moment restricted in that prospects cannot transfer them off its platform. However Robinhood Crypto COO Christine Brown instructed Decrypt in late Might that that is more likely to change within the close to future.
Within the submitting, Robinhood mentioned it should reserve as much as 35% of shares for its prospects to buy previous to the IPO. This association, which Robinhood has not too long ago provided for a handful of different pre-IPO corporations, is more likely to show standard amongst retail buyers who’ve lengthy complained the standard IPO course of unfairly offers deep-pocketed buyers first dibs on shares.
Robinhood first declared its intention to go public in March, however the course of has dragged out amid authorized wrangling with the SEC over crypto and different facets of its enterprise—a back-and-forth that’s widespread for a lot of pre-IPO corporations.
The discharge of the S-1 doc is likely one of the final steps an organization should take earlier than it lists its shares for public buying and selling. In Robinhood’s case, the itemizing is more likely to occur in August or September.
Robinhood’s impending IPO can also be possible to attract renewed consideration to the corporate’s enterprise mannequin. Because the firm doesn’t take a direct fee on buyer trades—a longtime cash maker for typical brokerages—it has needed to flip to different sources of income.
Whereas Robinhood makes some cash on premium accounts, its major income is one thing referred to as “fee for order stream” or PFOF. This entails routing batches of orders to market makers like Citadel Securities, which pays Robinhood a modest charge for the proper to execute them.
Robinhood and plenty of inventory market specialists have argued that PFOF finally advantages small buyers as a result of it ends in them getting a bulk low cost on their orders. However critics declare the observe is underhanded and quantities to a secret type of commissions, and has led to scrutiny from members of Congress.
Robinhood has additionally attracted scrutiny from monetary regulators, together with FINRA, which not too long ago smacked the corporate with a $70 million high-quality. The penalty, the most important within the company’s historical past, was associated to a sequence of outages that compelled the corporate to droop buying and selling operations for hours, and even days, at a time.
The corporate’s troubles with Congress and regulators are more likely to show transitory, although, particularly as Robinhood has been capable of navigate latest market volatility with out main difficulties.
Even when regulators put strain on Robinhood’s coffers or enterprise mannequin, the corporate has loads of runway to develop others thanks to an enormous infusion of enterprise capital it has raised. This features a large $2.4 billion infusion in February.
This story was up to date a number of occasions to incorporate additional particulars from the S-1 submitting.
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