(Bloomberg) – Robinhood Markets Inc. went public and announced it was profitable last year, only to add to its first quarter losses in one of the most notorious upcoming listings of the year.
The company proposing its trading platform to beginners has put the size of the offering at $ 100 million, a placeholder that will change as it sets the terms for selling shares. Thursday’s registration statement follows Robinhood’s March announcement that it had gone public in confidence.
Robinhood said it had net income of $ 7.45 million on net sales of $ 959 million in 2020, compared with a loss of $ 107 million on $ 278 million the previous year.
The company’s revenue skyrocketed in the first quarter, exceeding $ 522 million from $ 128 million for the same period last year. However, losses soared astronomically from $ 53 million in the three months ended March 31, 2019 to $ 1.44 billion in the final quarter. This loss was mainly due to an adjustment in the fair value of convertible bonds and warrants, the company announced in the filing.
Cryptocurrency trading on Robinhood boomed in the first quarter, with 17% of total sales including related transactions.
Robinhood’s potential valuation will become clearer once the number of shares proposed and the proposed price range for them is disclosed. Bloomberg Intelligence analyst David Ritter said the company could be worth up to $ 40 billion.
‘Meme Stick Frenzy’
Robinhood’s appeal caught on during the coronavirus pandemic when young people at home turned to online trading to pass the time and make money. Monthly active users more than doubled last year to 17.7 million in the first quarter, compared to 8.6 million in the same period last year.
This surge in popularity has led to scrutiny by politicians and regulators focusing on what is known as the gamification of trade and the company’s role at the center of the meme-share frenzy.
Robinhood also had to raise billions of dollars from its backers, at the height of a volatile frenzy in late January for “meme stocks” like GameStop Corp., which became popular on Reddit forums and trading apps.
The financial industry regulator on Wednesday fined Robinhood, a record for the watchdog, of nearly $ 70 million. Finra alleged Robinhood misled its clients about margin trading and failed to oversee technology and approvals for options traders. Robinhood has neither admitted nor denied the claims.
Robinhood stated in its motion that its mission is to “democratize finance for all”.
Robinhood was founded by Stanford alumni Baiju Bhatt and Vlad Tenev, who met at university. Both are sons of immigrants and grew up in rural areas of the United States
“The next generation of investors is younger and more diverse than ever, and finance is as culturally relevant today as music and the arts,” Tenev and Bhatt said in a letter to investors.
However, the company warns in its filing that “poor advertising has hurt our reputation in the past and could hurt our reputation in the future”.
The Menlo Park, Calif., Company said in the filing it would reserve 20 to 35% of its Class A shares for its customers.
The company will have two more classes of shares, with class B shares having 10 votes each and class C shares being non-voting. All Class B shares will be held by officers and directors of the company following the IPO.
Robinhood’s largest shareholders are venture firms DST Global, Index Ventures, New Enterprise Associates, and Ribbit Capital. Each group owns more than 5% of the Robinhood shares leading up to the offering.
The listing gives the IPO market a further boost in 2021. To date, companies, including blank check firms, have raised more than $ 200 billion on U.S. exchanges, the busiest year on record, according to data compiled by Bloomberg. Consumer-centric companies like Warby Parker Inc., Sweetgreen Inc. and Allbirds Inc. are expected to make their public debuts later this year, reported Bloomberg News.
Robinhood said in June that it will add new directors to the board, including Jon Rubinstein, who helped develop the iPod for Apple Inc. and is a director at Amazon.com Inc., Robert Zoellick, former World Bank president and PricewaterhouseCoopers Partner Paula Loop.
The company’s credit lines include a $ 600 million revolver from banks such as JPMorgan Chase & Co., Goldman Sachs Group Inc., and Morgan Stanley, according to data compiled by Bloomberg.
Robinhood’s offering is led by Goldman Sachs and JPMorgan. The shares are expected to trade on the Nasdaq Stock Exchange under the symbol HOOD.