On Thursday, Robinhood is a well-known retail investing app that publically filed for an IPO. However, the company’s S-1 document filed with the Securities and Exchange Commission revealed plans that are to be listed on the Nasdaq stock market under the ticker symbol HOOD.
Notably, the Silicon Valley-based company was introduced in 2013 by Vlad Tenev and Baiju Bhatt. The company even took the investing world by storm that enables the user to trade stocks and ETFs for free on its mobile app. In 2020, its popularity rose to a new height as amateur investing enhanced the pandemic.
Well, in the filing, Robinhood mentions its $18.5 million funded accounts as well as $80 billion in consumer assets as of 31st March over double the prior years. More than 50% of the users are first-time investors and the invaders mentioned that they have planned to continue making the financial investing even more accessible. Additionally, the company mentioned that it wants to set aside as much as 35% of its shares for individual investors.
They mentioned in a letter to shareholders, “We’d rather serve many small customers than a few large ones, and, while our competitors strive to go further ‘upmarket,’ we continue to see opportunity in serving those left behind, including underbanked customers, not just in the United States but all over the world.”
Robinhood shared that they make money through a practice that is known as “payment for order flow” within retail brokers route trade requests to other firms for executing the exchange for a commission. In the last year, Robinhood derived 75% of its total revenue from payment to ordering flow and transaction rebates.
Notably, the company highlighted that majority of the revenues to go through just 4 makers, a potential risk only if one takes the decision to invest in the startup.
However, the filing is one of the public’s first comprehensive looks at Robinhood’s finances. In the year 2020, it’s the revenue that grew by 245% to hit reach $959 million, while it reserved the losses to post a $6.3 million profit. Within the first quarter of 2021, there was a $1.4 billion loss.
Robinhood mentioned that there are tremendous regulatory risks for its stock. On this Wednesday, the company was fined around $70 million by the securities industry’s self-regulator, FINRA, for misleading consumers and system outages that the agency mentioned that may hurt Robinhood’s consumers. The startup stated that it will likely incur similar fines in the near future. Now, Goldman Sachs and JP Morgan are leading the offering.