Robinhood Files for IPO

So… They have 18 million funded accounts, half of them crypto.
They have managed to break even in 2020 (net $7M), but could not keep that in Q1 2021, despite the staggering $522M revenue. Most of their revenue comes from payment-for-order-flow, which is illegal in the UK, and there are indications that it could also be banned in the US.

What do you think, will they remain profitable in 2021 and what’s your guess on the valuation? (last rumors were $40B)

PS: @Joey_Fantana The code is #HOOD :smiley:

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Also worth to mention is the RH recent fines:

Financial regulators levy historic $70M fine on Robinhood

Financial regulators have ordered stock trading app Robinhood to pay $70 million for what they call “systemic supervisory failures” and “significant harm” caused to consumers related to a variety of issues dating back to 2016 for the popular platform, Reuters reports.

The penalty, which includes a $57 million fine plus $12.6 million in restitution to consumers, is the largest-ever levied by the Financial Industry Regulatory Authority, the agency said Wednesday. The regulator said that its investigation found that Robinhood was negligent in communicating important information to users and exposed them to overly risky investments such as options. The company also suffered from multiple outages on its platform amid heavy trading of so-called “meme stocks,” which disrupted trade for its users, which include many younger investors.

Robinhood has said in statements that since early 2020 it has taken a number of corrective steps, including providing more customer support and monthly account reviews and beefing up its legal team.

Robinhood, which has raised $5.6 billion from investors and is getting ready for an IPO, separately paid $65 million to the U.S. Securities and Exchange Commission late last year to settle charges that it had misled users about its sources of revenue. Bloomberg reported earlier this week that the IPO, which was initially slated for June, has been delayed amid scrutiny from the SEC of Robinhood’s cryptocurrency business.

https://www.ft.com/content/6b219b78-97c8-4c24-b11c-0b7be63e970b

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LOL love the ticker $HOOD :smiley:

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@RLX Absolutely! It’s now obvious that this settlement been the final legal hurdle that was holding the IPO back - a few hours after it was official they announced the IPO.

Yet, there are so many problems ahead - more than 50 class actions are pending and at least 7 Regulatory investigations (reading from @Karena’s link). Take a look at the reaction of Elizabeth Warren: https://twitter.com/SenWarren/status/1410355305389645829

A huge amount of the S-1 filing was dedicated to how Robinhood has learned from its lessons. As if its future is all about not repeating the past.

Honestly, I’m not optimistic about their long-term growth. They imply the interest from retail will continue to grow after the pandemic and they are setting expectations for expansion in Europe and Asia. And we know they can’t have the sweet payment-for-order-flow revenue here in the UK, and there’s Trading 212 :grin: Speaking of, the securities lending consisted of just 7% of Robinhood’s last quarter revenue, but it is growing. With the absence of PFOF in the UK, I now see an fx fee totally justified.

What does Robinhood look like in a bear market, or even after the current boom? We have no idea.

@Karena Very interesting. What amazed me is their “cash cushion” - $4.8bn :open_mouth: Furthermore, they could be holding about $4bn worth of Dogecoin… that’s about 7% of all the coins in circulation. Who’s the true ‘Dogefather’ now - Elon, or Vlad? :joy:

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Reminds you of HODL, does it? :smiley:

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The crypto trading could help RH, I have read somewhere that crypto trading contributes to higher revenues, and that is a very important source of income for the trading platforms. Not sure of the platform mentioned, could be Square or other trading platform (wasn’t a crypto trading/exchange platform).

Exactly haha :smiley:

Alternative would’be been $ROBN, but I guess that sounds too much like Robbin’

The war for cool tickers overseas is insane…

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I think YODA takes it though :upside_down_face:

https://www.londonstockexchange.com/stock/YODA/hanetf/company-page

Not yet tradable on 212…

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Humm, JEDI was already taken? :stuck_out_tongue:

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Lol yeah the guys at Han are getting in on the action! TRYP and JETS are also EU versions of pretty successful US sector ETFs - and catchy tickers too :slight_smile:

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From their S-1:

In the case of equities, the fees we receive are typically based on the size of the publicly quoted bid-ask spread for the security being traded; that is, we receive a fixed percentage of the difference between the publicly quoted bid and ask at the time the trade is executed. For options, our fee is on a per contract basis based on the underlying security. In the case of cryptocurrencies, our rebate is a fixed percentage of the notional order value . Within each asset class, whether equities, options or cryptocurrencies, the transaction-based revenue we earn is calculated in an identical manner among all participating market makers.

Most of their revenue comes from options and crypto rebates. As far as I read crypto revenue has grown to 14% of total in Q1, and 34% of that was Dogecoin trading. So I imagine it has plummeted recently.

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Can only see it crashing and burning when more MEME Stocks are bought and then restricted by them.

They seem to not be professionally competant and the US Government watching them like a hawk doesn’t help matters, nor WallStreetBets advocating winning or losing millions on the platform.

WallStreetBets is advocating buying put options for $HOOD. :laughing:

Regarding restricting MEME Stocks - things are different now. With such an enormous “cash cushion” available for collateral, they might not have to restrict the stocks as in January.

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What is their strike price? :wink:

I’ll be the devils advocate here and say how about

I wouldn’t touch it even if it was the only stock available…

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While we’re on the topic, how about Galway Metals Inc. from the Toronto stock exchange - GAYMF; or another from our Canadian friends - ZZZ for the mattress company, 'Sleep Country Canada.

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You also have Cornish Metals (CUSN).

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Or the French ticker which surely Cummins Inc. should have known better…

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Paywall :frowning:

could you be so kind and post the article?