Robinhood's S-1 filing has been published, revealing trends around stock and crypto trading.
Key Takeaways
- Robinhood's S-1 document, filed in preparation for its stock offering, was published online by the U.S. SEC today.
- The document details Robinhood's IPO plans alongside details concerning stock and crypto trading revenue.
- Though Robinhood is primarily a stock trading platform, much of its business involves Dogecoin and other cryptocurrencies.
Stock and crypto trading service Robinhood has filed an S-1 in preparation for its upcoming IPO, which was published yesterday on the website of the U.S. Securities and Exchange Commission.
IPO Details Revealed
Robinhood aims to raise $100 million through its upcoming IPO sale, though that amount may change in the future.
The stock will be listed on Nasdaq as “HOOD,” and about 20% to 35% of Robinhood’s shares will be available to retail investors.
Several banks will serve as underwriters, including Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), (Barclays (NYSE:BCS), JPMorgan (NYSE:JPM), and Wells Fargo (NYSE:WFC).
Robinhood has not yet revealed a date for its IPO. Last week, reports indicated that Robinhood’s IPO would be delayed due to inquiries from the SEC over its crypto trading activities.
Robinhood is not the only trading company in the crypto industry to run an IPO. The popular cryptocurrency exchange Coinbase (NASDAQ:COIN) ran an IPO in April, while Kraken is also planning a listing for 2022.
Business Details Disclosed
Robinhood’s S-1 also revealed several details about its recent business activities. In 2020, the company accrued $7.45 million of net income based on net revenue of $959 million.
This growth is notable in light of the fact that Robinhood saw a $106.6 million loss in 2019 after bringing in $278 million of revenue.
The company also lost $1.4 billion in Q1 2021 due to the GameStop (NYSE:GME) short squeeze, which saw retail investors coordinate investments in certain stocks and cryptocurrencies in order to take advantage of the market. That forced the company to raise funds from its backers.
Robinhood acknowledged in the S-1 filing that it has “grown rapidly” to a scale it is not familiar with. It added: “If we are unable to manage our growth effectively, our financial performance may suffer and our brand and company culture may be harmed.”
As such, Robinhood’s varying success could make the company’s stock a particularly risky investment for retail investors.
Robinhood Relies Heavily on Crypto
Robinhood also indicated in its S-1 filing that cryptocurrency has played a significant role in its trading activity. According to the document, about 17% of its activity in 2021 involved crypto.
The company also commented on the fact that it does not allow investors to deposit and withdraw cryptocurrency. Currently, investors can only redeem their crypto investments for cash.
Robinhood stated in its filing that cryptocurrency deposits and withdrawals could lead to a “loss of customer assets, customer disputes and other liabilities, which could adversely impact our business, financial condition and results of operations.”
Nevertheless, recent reports suggest that Robinhood is likely to add crypto deposits and withdrawals due to customer demand.
Dogecoin Powered Crypto Trading
Dogecoin specifically accounted for approximately one-third of Robinhood’s cryptocurrency-based revenue in 2021.
That trend is likely due to the fact that the price of Dogecoin has grown rapidly over the past several months. DOGE has gained over 10,500% in market value year-to-date.
Robinhood acknowledged that this extreme price change has implications for its business. It wrote: “If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies…[Robinhood] could be adversely affected.”
Earlier this year, Robinhood temporarily suspended Dogecoin trading in the wake of the Gamestop squeeze and related shortselling.
It seemms that the Dogecoin bubble has popped and that prices have stabilized. Last month, DOGE’s price fell by 25%. It remains to be seen how Robinhood will adapt to this shift in the market.