Robinhood Markets Inc. applied for an initial public offering and disclosed that it made a profit last year, but its losses in the first quarter increased significantly. This is one of the most eye-catching listings this year.
The company promotes its trading platform to novice investors, listing the size of the offering at $100 million, a placeholder that will change when it sets the terms of the stock sale. Thursday’s registration statement was issued after Robinhood announced in March that it had been secretly submitted for listing.
According to the documents, Robinhood said that in 2020, net income was 959 million U.S. dollars and net income was 7.45 million U.S. dollars, compared with 278 million U.S. dollars the previous year and a loss of 107 million U.S. dollars.
The documents show that the company’s revenue surged in the first quarter to more than $522 million, compared with $128 million in the same period last year. However, its loss soared from US$53 million in the three months ended March 31, 2019 to US$1.44 billion in the most recent quarter. The company stated in the document that this loss was mainly due to fair value adjustments to convertible notes and warrant liabilities.
Cryptocurrency trading on Robinhood flourished in the first quarter, and 17% of its total revenue involved transactions related to it.
When Robinhood discloses the number of stocks it plans to sell and the proposed price range, its potential valuation will become clearer. Bloomberg Intelligence analyst David Ritter said the company’s value could be as high as $40 billion.
The appeal of Robinhood became popular during the coronavirus pandemic, as young people living at home turned to online transactions to pass the time and make money. Its monthly active users have more than doubled in the past year, reaching 17.7 million as of the first quarter, up from 8.6 million in the same period last year.
This increasingly popular practice has attracted scrutiny from politicians and regulators who focus on the so-called gamification of transactions and the company’s role in the meme-stock frenzy.
Robinhood must also raise billions of dollars from its supporters, when the enthusiasm for “memetic stocks” (such as “memetic stocks” that became popular on Reddit forums and trading apps) was at its peak in late January.
The Financial Industry Regulatory Authority imposed a fine of nearly $70 million on Robinhood on Wednesday, setting a record for regulators. Finra accused Robinhood of misleading clients in margin trading and lapses in technical supervision and approval of option traders. Robin Hood neither admitted nor denied these claims.
Young and diverse
Robinhood declared in its documents that its mission is to “democratize finance for all.”
Robinhood was founded by Baiju Bhatt and Vlad Tenev, two Stanford University alumni who met at the university.Both are the sons of immigrants and grew up in rural America
“The next generation of investors are younger and more diverse than ever before, and finance is now as culturally relevant as music and art,” Tenev and Bhatt said in a letter to investors.
However, the company warned in its documents that “adverse publicity has adversely affected our reputation in the past and may have an adverse effect in the future.”
The Menlo Park, California-based company stated in a document that it will retain 20% to 35% of Class A shares for its customers.
The company will own the other two types of shares. Class B shares will each have 10 votes, and Class C shares will have no voting rights. The documents show that all Class B shares will be held by company executives and directors after the IPO.
Robinhood’s largest shareholders are venture capital firms DST Global, Index Ventures, New Enterprise Associates, and Ribbit Capital. Each group owns more than 5% of Robinhood stock.
This listing has brought another boost to the IPO market in 2021. According to data compiled by Bloomberg, so far, companies including blank check companies have raised more than $200 billion in funds on US exchanges, the busiest year on record. According to Bloomberg News, consumer-oriented companies such as Warby Parker Inc., Sweetgreen Inc. and Allbirds Inc. are expected to make their public debuts later this year.
Robinhood said in June that new directors will join the board of directors, including Jon Rubinstein, who created the iPod for Apple Inc. and served as a director of Amazon.com Inc., and Robert Zoellick Ring of Paula, former president of the World Bank and partner of PricewaterhouseCoopers.
According to data compiled by Bloomberg, the company’s credit line includes $600 million revolvers from banks such as JPMorgan Chase, Goldman Sachs and Morgan Stanley.
The Robinhood issuance was led by Goldman Sachs and JPMorgan Chase. Its stock is expected to be traded on the Nasdaq stock market under the symbol HOOD.