It’s been a record year for retail investors, and even more so for popular investing app Robinhood. Despite the controversies seen in the past 12 months – i.e. imposing trade restrictions on shares like GameStop (NYSE: GME) at crucial junctures; the publicised suicide of a 20-year-old customer who believed he’d lost over US$730,000 due to a reporting error – the financial platform co-founded by Stanford roommates Vlad Tenev and Baiju Bhatt has experienced considerable growth. Now, after pricing its IPO at US$38 per share ahead of tomorrow’s NASDAQ debut, Robinhood has a valuation of US$32 billion (AU$43 billion).
Adopting the ticker code HOOD, believe it or not, the current figure represents something of a disappointment, considering it had an upper pricing target of US$42 per share. Having already sold 52.4 million shares, however, you can’t exactly complain about a tidy US$2 billion raise – in addition to the US$3.4 billion raised back in February; shares then trading on private secondary markets at a US$40 billion valuation. And just to put this all into perspective, Robinhood will start with a market capitalisation already vastly exceeding that of ASX darling Afterpay’s $29.6 billion, which first listed back in 2017.
What’s unique about the Robinhood IPO is how up to 35% of its IPO shares have been allocated to users of the app. More often than not, retail investors are restricted from getting in on the action at the pricing reserved for institutional players. But true to the entire spirit of “democratising finance”, old mate Vlad and Baiju clearly want the general masses involved.
In terms of the company health, Robinhood has 22.5 million funded accounts as of the second quarter – a decent increase from the 18 million users it had during Q1 of 2021 alone, and an overall increase of 151% from the year prior. As outlined by the updated prospectus, revenue has also seen a remarkable climb in the way of 309% within a single year. In Q1 of 2020, the nouveau brokerage generated US$128 million; after the most recent first quarter, we’re talking US$522 million. Regardless, Robinhood isn’t profitable at this stage (the “p” word is a luxury in the realm of tech startups).
According to CNBC, options trading makes up approximately 38% of revenue, equities 25%, and cryptocurrency 17%. Though Robinhood themselves have warned a slowdown in both trading revenue and account growth has been forecasted as the historic surge in retail trading levels off.
If the Robinhood share price manages to cross $101.50 by 2025, Vlad Tenev and Baiju Bhatt will unlock jaw-dropping compensation awards amounting to a cheeky US$1.4 billion each. Certainly not the worse thing to wake up to.
Keen to throw a few bucks at NASDAQ: HOOD? Check out the BH guide for buying US share in Australia here.