Robinhood IPO: A look at the company’s crypto growth

For Q1FY21, Robinhood saw more than 9.5 million customers make cryptocurrency trades worth $88 billion on the platform. (Representative Image)

Robinhood Markets Incorporated announced its hotly anticipated initial public offering (IPO) on July 1 to a flood of new users and a barrage of investigations by prosecutors and regulators on the back of the so-called meme stocks such as GameStop.

The online brokerage is aiming for an IPO valuation of over $40 billion, with Goldman Sachs and JP Morgan underwriting the offering. It plans to list on the Nasdaq as 'HOOD', Reuters reported.

The company was founded in 2013 by Tenev and Baiju Bhatt and especially gained popularity among younger users during the pandemic due to its user-friendly trading app, which simplified securities trading for budding enthusiasts.

Popularity, Robinhood’s S-1 papers showed, has zoomed to the top over the past 18 months. In fact, the company turned profitable in 2020, raking in revenue of $959 million last year, with net income at $7 million. In contrast, it lost $107 million in 2019.

SEC Form S-1 is a registration required for US companies looking to get listed on a national exchange. It is a statement filed in connection with an initial public offering.

Also read: Robinhood IPO: 10 things to know including increased revenues, legal scrutiny and regulatory fines

The company has collectively raised over $5.5 billion from investors since 2013 and is valued at $30 billion. Investors include Andreessen Horowitz, ICONIQ, Index Ventures, New Enterprise Associates, Ribbit Capital and Sequoia Capital.

Papers showed the company had around $12 billion in cryptocurrency assets till March 31, 2021. This is 23 times higher than its crypto assets in 2020. Notably, more than 9.5 million customers traded close to $88 billion of cryptocurrency on Robinhood's platform during the same period.

Also read: What Robinhood's IPO filing says about the Reddit army

- The company showed strong crypto offering performance, particularly with dogecoin.

It said that for the three months ended March 31, 2021, 17 percent of total revenue was derived from crypto transactions. This is a huge jump compared to the 4 percent recorded for the three months year ended December 31, 2020.

The platform supports seven cryptocurrencies for trading. By the three months ended March 31, 2021, 34 percent of the crypto transaction revenue was driven by dogecoin.

- For Q1FY21, Robinhood saw more than 9.5 million customers make cryptocurrency trades worth $88 billion on the platform.

- The company holds about $12 billion in cryptocurrency Assets Under Custody as of March 31, 2021, a 23-fold increase from March 31, 2020.

- Robinhood earned $88 million in revenues from its crypto platform in Q1FY21.

- Regulators are also focused on the company’s crypto business with the SEC’s scrutiny of the business unit being responsible for the IPO delay, Bloomberg reported.

- The California attorney general’s office is also conducting an investigation into the company’s crypto business, papers revealed. This was previously unknown information.

Robinhood said the investigation was about its “trading platform, business and operations, application of California’s commodities regulations to RHC and other matters” and added that it is "cooperating with this investigation" but cannot predict the outcome or consequences from it.

- The papers also spoke of a "settlement in principle" with the New York state department of financial services following an examination “focused primarily on anti-money laundering and cybersecurity-related issues”.

A settlement was reached “in principle with respect to these allegations, subject to final documentation”. It added that Robinhood “will pay a monetary penalty and engage a monitor”.