Robinhood has 18 million accounts with $80 billion in assets after rapid growth, IPO filing shows

The trace of shopping and selling app Robinhood is displayed on a smartphone.

Olivier Douliery | AFP by job of Getty Images

Robinhood Markets filed for regarded as one of doubtlessly the most anticipated initial public offerings of the 365 days on Thursday, revealing fast development ensuing in 18 million retail customers and more than $80 billion in customer resources.

Unlike many most up-to-date IPOs, Robinhood changed into as soon as marvelous closing 365 days, generating a win earnings of $7.45 million on win revenue of $959 million in 2020, versus a lack of $107 million on $278 million in 2019, in preserving with Robinhood’s S-1 filing with the Securities and Replace Commission.

Nonetheless, the brokerage misplaced $1.4 billion in the first quarter of 2021 tied to emergency fundraising-connected losses in some unspecified time in the future of January’s GameStop shopping and selling mania. The corporate generated $522 million in revenue in the first quarter if 2021, up 309% from the $128 million earned in the first quarter of 2020. Alternatives shopping and selling accounts for approximately 38% of revenue while equities and crypto are 25% and 17% of revenues, respectively.

The brokerage goals to make a selection $100 million in the public debut.

Robinhood plans to trade below the emblem “HOOD” on the Nasdaq.

In its prospectus, the corporate acknowledged it has grown its funded accounts, those which have bank accounts linked to them, to 18 million in March of this 365 days from 7.2 million in 2020, an gain bigger of 151%. Resources below custody have ballooned to roughly $80 billion from $19.2 billion closing March. Monthly active customers total about 17.7 million.

Robinhood plans to allocate between 20% and 35% of its IPO shares to its retail customers.

Goldman Sachs, Citigroup and JPMorgan are the lead underwriters on the deal, amongst other banks.

Unusual York-basically basically basically based D1 Companions, Sequoia, Kleiner Perkins, Index Ventures and Google’s challenge capital arm, GV, are a number of of Robinhood’s largest challenge capital investors.

Free-shopping and selling pioneer

Robinhood changed into as soon as founded in 2013 by now CEO Vlad Tenev and Baiju Bhatt. Now, the corporate has 2,100 corpulent-time employees.

The Menlo Park, California-basically basically basically based commence-up pioneered free stock shopping and selling, forcing your total industry to drop commissions in 2019.

Robinhood provides equity, cryptocurrency and alternate suggestions shopping and selling, as effectively as cash management accounts. Users can gain most trades for free. The app makes the huge majority of its money from customer list fade and a top class paid service.

The stock shopping and selling company quiet a story $331 million in fee for list fade – the money brokerage firms procure for directing customers’ trades to market makers – in the first quarter of 2021, in preserving with a regulatory filing with the SEC.

“On myth of a majority of our revenue is transaction-basically basically basically based (including fee for list fade, or “PFOF”), diminished spreads in securities pricing, diminished ranges of shopping and selling process most incessantly, adjustments in our industrial relationships with market makers and any unique legislation of, or any bans on, PFOF and identical practices would possibly maybe also merely result in diminished profitability, increased compliance expenses and expanded doable for detrimental publicity,” the S1 filing acknowledged.

Robinhood — whose longstanding mission is to “democratize” investing — is considered because the necessary gateway for younger investors to gain entry to the markets.

The app skilled narrative ranges of unique, youthful traders entering the stock marketplace in some unspecified time in the future of the pandemic.

That surge has persisted into 2021, marked by frenzied shopping and selling around so-called meme shares. The millennial-favored stock shopping and selling app chanced on itself in the heart of a firestorm in January amid the short squeeze in GameStop, which changed into as soon as partly fueled by Reddit-pushed retail investors.

On the peak of GameStop’s surge, Robinhood restricted shopping and selling of obvious securities due to increased capital necessities from clearing properties.

Robinhood presented on Also can merely 20 that it’s giving retail investors gain entry to to IPO shares, an stammer long exclusive to Wall Street banks and advanced investors.

Rising difficulty

Robinhood’s spectacular development has plan with its challenges.

On Wednesday, Robinhood changed into as soon as slapped with FINRA’s largest ever penalty, totaling about $70 million. The settlement regards the technical failures Robinhood skilled in March of 2020, Robinhood’s lack of due diligence sooner than approving customers to avoid losing alternate suggestions trades and purveying deceptive data to customers about functions devour shopping and selling on margin.

Robinhood has additionally faced court docket cases for its more than one days of outages in some unspecified time in the future of cases when shopping and selling quantity changed into as soon as heavy in some unspecified time in the future of the pandemic.

“Now we have grown hasty in most up-to-date years and we’ve restricted working expertise at our contemporary scale of operations; if we’re unable to control our development effectively, our financial performance would possibly maybe also merely undergo and our trace and company culture would possibly maybe also merely be harmed,” Robinhood acknowledged in the “possibility components” fragment of the prospectus.

Robinhood paid the Securities and Replace Commission $65 million after being charged with deceptive customers about how the app makes money and failing to sigh the promised simplest execution of trades. The SEC’s expenses got here a day after Massachusetts regulators filed a criticism accusing the shopping and selling app of predatory marketing on inexperienced investors.

Robinhood changed into as soon as additionally sued for wrongful death by the family of Alex Kearns, a 20-365 days-pale customer who took his life closing summer season after believing he had racked up mountainous losses on the millennial-favored stock shopping and selling app.

Furthermore, Robinhood’s chief Tenev changed into as soon as compelled to testify to the U.S. Dwelling Monetary Products and services Committee in February referring to the GameStop shopping and selling mania. Legislators criticized fee for list fade, the subsidy Robinhood receives from market makers devour Castle Securities for bringing them trades.

Price for list fade is a frequent educate, but it’s customarily criticized for its lack of transparency. 

Robinhood has since taken steps to address a number of of the scrutiny devour offering more training products and services from its customers and taking away the confetti characteristic when investors gain trades.

Robinhood ranked No. 1 on this 365 days’s CNBC Disruptor 50 list.

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