Robinhood Makes IPO Prospectus Public, Revealing First-Time Profitability Due Largely to Dogecoin
Robinhood Markets made public the prospectus of its much-anticipated initial public offering today, revealing it had grown its funded accounts by 151% year-over-year to 18 million — from 7.2 million — according to a Securities and Exchange filing.
In addition, Robinhood said in the prospectus that it would set aside 20% to 35% of its shares to retail investors via the platform it had introduced in May, IPO Access. The new platform will enable retail investors the opportunity to buy shares of companies at their IPO price, before trading on public exchanges and participate in upcoming IPOs with no account minimums.
The company, with $80 billion in assets under management, will be traded on NASDAQ under the ticker “HOOD,” according to the prospectus. The prospectus also revealed that Robinhood made a lot of money off Dogecoin.
“A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected,” according to the prospectus.
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While the platform currently supports a portfolio of seven cryptocurrencies for trading, for the three months ended March 31, 2021, 34% of its cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin. This is in comparison to 4% for the three months ended December 31, 2020, according to the prospectus.
For the same period, 17% of the company’s total revenue was derived from transaction-based revenues earned from cryptocurrency transactions. In addition, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, total revenue grew 309% to $522 million, up from $128 million.
Robinhood has faced a slew of legal trouble in the past months. Just yesterday, the Financial Industry Regulatory Authority (FINRA) fined Robinhood $57 million and ordered the firm to pay approximately $12.6 million in restitution, plus interest, to thousands of harmed customers. The sanctions represent the largest financial penalty ever ordered by FINRA and reflect the scope and seriousness of the violations, the regulator said in a statement. And in February, Robinhood’s CEO Vladimir Tenev testified before Congress following the market frenzy that ensued when the app halted trading of certain stocks popular on the Reddit subthread r/WallStreetBets, including AMC and GameStop.
Peter Cohan, a lecturer at Babson College and author of “Goliath Strikes Back,” tells GOBankingRates that he thinks there will be tremendous demand for the shares of this IPO and that it will result in massive media attention.
“Robinhood will be the ultimate meme stock — a meta-meme. People who fear missing out will clamor for its shares,” Cohan says. “People who buy into this stock will look at the FINRA fines as clearly the way for HOOD to keep going forward. Those meme-hungry investors will overlook the fact that over 60% of its revenues in the first quarter came from payment for order flow — e.g., front-running their trades.”
The prospectus also outlines the company’s growth strategy, which includes: continuing to add new customers to its platform; growing with its customers; continuing product and technology innovation; and expanding internationally including into Europe and Asia.
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Last updated: July 1, 2021