Robinhood says dogecoin accounted for 34% of crypto revenue in Q1


CNBC 01 July, 2021 - 02:32pm 50 views

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Robinhood. After years of speculation, Robinhood is planning to go public in 2021. On March 23, 2021, the company announced on its blog that it confidentially submitted early IPO paperwork to the SEC. nerdwallet.comInvesting - 10 Upcoming IPOs to Watch

Robinhood, the company that helped popularize stock trading in recent years, saw such growth in dogecoin transactions this year that it included a specific risk in is IPO prospectus tied to the cryptocurrency.

The company said in its IPO filing on Thursday that the meme-inspired token accounted for 34% of its cryptocurrency transaction-based revenue in the first quarter. That's up from 4% in the fourth quarter.

Much of that growth has coincided with a barrage of tweets about dogecoin from Tesla CEO Elon Musk, who on Thursday tweeted "Release the Doge!"

Dogecoin-derived income accounted for 6% of the company's overall revenue in the period, while crypto made up 17%. The trading app offers seven different digital coins, including bitcoin, ethereum and litecoin.

Robinhood said that its business could be hurt "if the markets for dogecoin deteriorate or if the price of dogecoin declines, including as a result of factors such as negative perceptions of dogecoin or the increased availability of dogecoin on other cryptocurrency trading platforms."

Crypto trading, which was first introduced on Robinhood in 2018, has ballooned in the last few years. Robinhood makes money in crypto by routing orders to market makers that the company says offer "competitive pricing" and taking a percentage of the order value.

Overall, crypto assets on the platform skyrocketed in the first quarter on a year-over-year basis from $480.7 million to $11.6 billion. Total revenue increased 309% in the period to $522 million from $128 million a year earlier.

But scaling has at times proven problematic, according to the filing. For example, partial service outages and degraded service during times of high crypto trading volume were an issue in mid-April and early May.

Similar to PayPal, which does not allow its customers to transfer crypto holdings to other digital wallets, Robinhood doesn't let users deposit or withdraw cryptocurrencies into or out of the app, though it said it may add such a feature down the line. 

While Robinhood doesn't name any rivals in the filing, the company acknowledges that it operates in "highly-competitive" markets alongside "discount brokerages, established financial technology companies, venture-backed financial technology firms, banks, cryptocurrency exchanges, asset management firms and technology platforms."

In addition to PayPal, Coinbase, which went public earlier this year, and Square's Cash App are two popular services used by U.S. consumers to buy and sell cryptocurrencies.

WATCH: Robinhood tops CNBC's 2021 Disruptor 50 list

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Robinhood Online Brokerage Files to Go Public

TheStreet 01 July, 2021 - 01:35pm

The Menlo Park, Calif., company plans to trade on the Nasdaq under the ticker symbol HOOD.

The announcement came one day after Robinhood was ordered to pay about $70 million in penalties for systemwide outages and misleading communication and trading practices by the Financial Industry Regulatory Authority.

"Our mission is democratize finance for all," the company said in its filing.

The company, which has 2,100 full-time employees, said in its filing that it planned to allocate 20% to 35% of its IPO shares to its retail customers.

Robinhood has 18 million net cumulative funded accounts, according to the filing. It has 17.7 million monthly active users as well as $81 billion of assets under its custody. Robinhood said that more than half of its clients are first-time investors.

The company took in $522 million of revenue in the first quarter, quadruple the $128 million of the year-earlier period.

Robinhood earlier this year found itself at the center of the retail trading frenzy as followers of the sub-reddit r/WallStreetBets launched a concerted effort to boost the shares of GameStop  (GME) - Get Report and force a short squeeze. 

The Massachusetts state securities regulator filed a lawsuit against the company, charging Robinhood uses “aggressive tactics” and “gamification” to attract inexperienced investors.

Last year, Alexander Kearns committed suicide after he thought he'd run up massive losses in a Robinhood trading account. 

Kearns, 20, was a student at the University of Nebraska. He thought he'd generated losses of more than $730,000. He had not.

Robinhood filed confidentially with the Securities and Exchange Commission to go public in March.

Robinhood was founded in 2013 by Vlad Tenev, who now is chief executive, and Baiju Bhatt.

Robinhood reveals financial, legal bruises in IPO filing

Reuters 01 July, 2021 - 12:21pm

The online brokerage, which was at the center of a confrontation between a new generation of retail investors grouping on social media and Wall Street hedge funds in late January, is aiming for an IPO valuation of over $40 billion, Reuters previously reported.

Menlo Park, California-based Robinhood, hit with a $70 million fine by regulators this week for systemic failures and providing false and misleading information, reported a 245% jump in revenue last year, according to the filing, as it fed on the surge in trading by ordinary Americans stuck at home. The filing also detailed a swathe of government probes.

However, the growth came at a cost as it was forced to raise a life-saving funding round from investors after its finances were stretched at the height of the retail trading frenzy that gripped markets earlier this year.

The trading hysteria helped power a 309% jump in revenue to $522 million for the three months ended March 31. But the company incurred a net loss of $1.4 billion in the same period, which included a one-time $1.5 billion fair value adjustment to its convertible notes and warrant liability, due to the emergency fundraising in February.

Robinhood said underwriters would reserve between 20% and 35% of its Class A shares for sale to customers through its IPO Access feature, a platform it unveiled in May to give retail investors the opportunity to snap up shares in IPOs. read more

A majority of its revenue is earned from "payment for order flow", Robinhood said.

Under this practice, brokers receive a fee from market makers for routing trades to them. Critics argue the practice creates a conflict of interest situation, whereby brokers are incentivized to send orders to whoever pays the most, which might not necessarily be the best deal for customers.

In the first quarter of this year, 59% of revenue came from four market makers, it said. Payment for order flow practice has drawn heightened scrutiny from Congress, the Securities and Exchange Commission, state regulators, and other regulatory and legislative authorities.

Revenue for the year ended Dec. 31 rose to $959 million, the company said. Net income was $7 million, compared to a loss of $107 million a year earlier.

The company held about $12 billion in cryptocurrency assets under custody as of March 31, 2021, a 23-fold jump from the same period a year earlier. More than 9.5 million customers traded about $88 billion of cryptocurrency on Robinhood's platform during the same period.

Founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt, Robinhood's trading app has made it easier for the masses to trade securities and electrified a generation of retail traders.

The platform's easy-to-use interface allowed it to become a go-to for young investors trading from home during coronavirus-induced restrictions and its popularity has soared over the past 18 months.

Arguably the breakout financial technology startup of its generation, Robinhood has over the years captured the imagination of Silicon Valley's biggest investors who rushed to pour billions of dollars into the company.

Since it started, Robinhood has raised over $5.5 billion from investors including Ribbit Capital, ICONIQ, Andreessen Horowitz, Sequoia Capital, Index Ventures and New Enterprise Associates.

Its valuation nearly tripled in the last one year alone, with the latest financing valuing the company at around $30 billion, according to people familiar with matter.

However, Robinhood has also attracted its fair share of controversy and faced criticism from regulators.

The company attracted widespread flak after it was forced to curb trading in the middle of this year's surge in GameStop (GME.N) and other previously beaten-down stocks.

At the time, the company was forced to raise $3.4 billion in emergency funds after its finances were strained by the massive jump in retail trading and a resulting increase in capital demands from clearing houses. read more

Robinhood was also sued earlier this year by the family of a 20-year-old stock trader who committed suicide, citing the app's "misleading communications" that caused their son to panic over what he wrongly believed were huge market losses. read more

The online brokerage, which plans to list on the Nasdaq under the symbol "HOOD", had in March confidentially submitted plans to regulators for a U.S. IPO. read more

In December, Reuters was the first to report that Robinhood had picked Goldman Sachs Group Inc (GS.N) and other investment banks to lead preparations for an initial public offering. read more

Goldman Sachs and J.P. Morgan are the lead underwriters for Robinhood's offering.

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Robinhood Markets Inc on Thursday set the stage for its hotly anticipated stock market launch, after settling legal fines it said were unlikely to be its last and revealing a massive surge in growth in its initial public offering filing.

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Robinhood to set aside up to 35 percent of shares for retail investors: report

New York Post 01 July, 2021 - 06:54am

By Will Feuer

July 1, 2021 | 7:54am | Updated July 1, 2021 | 7:54am

Robinhood is putting its money where its mouth is.

The commission-free trading app plans to set aside as much as 35 percent of shares in its highly anticipated initial public offering for retail investors, The Wall Street Journal reported Thursday, citing people familiar with the matter.

And the company reportedly wants people to sign up to buy the shares on its new platform, called IPO Access, that gives users access to IPOs before they start trading.

The online brokerage wouldn’t be the first company to reserve a significant portion of shares for amateur investors at the IPO, but it is an unusually high retail allocation.

The plan would give amateur investors, as opposed to institutional players, the opportunity to buy shares of Robinhood at its preset IPO price.

It would also give the online brokerage the chance to capitalize on growing interest from individual investors, who have demonstrated an outsized impact on the market in recent months, pushing the price of a number of stocks like GameStop and AMC to astronomical levels.

It could also help Robinhood fend off competition from other online brokerages such as SoFi and Public that are launching their own platforms to give amateur investors access to IPOs.

This week, Robinhood let its users to buy up to 1 percent of IPO shares of Clear Secure, the maker of an identification platform. Language-learning app Duolingo also plans to reserve shares for Robinhood users when it goes public, the company said Tuesday in a filing.

And FIGS, a maker of medical attire, reserved about 1 percent of its IPO for Robinhood users.

“The alignment in terms of our customer base and who they are serving was there,” Trina Spear, FIGS Co-CEO, told the Journal.

However, investing in IPOs can be risky, as the companies have not been evaluated by the public markets before. There’s no guarantee that the IPO price accurately reflects how the market will value the company, and the stock could fall quickly.

A Robinhood spokeswoman declined to comment on the WSJ report.

Robinhood to pay $70 million for outages and misleading customers, the largest-ever FINRA penalty

CNBC 30 June, 2021 - 10:11am

Robinhood will pay roughly $70 million in penalties for its systemwide outages and misleading communication and trading practices, the Financial Industry Regulatory Authority said Wednesday.

The settlement regards the technical failures Robinhood experienced in March of 2020, Robinhood's lack of due diligence before approving customers to place options trades and purveying misleading information to customers about aspects like trading on margin. The stock market was diving that month in especially wild trading amid the outbreak of the Covid-19 pandemic.

FINRA — a self-regulatory organization that oversees brokerage firms and their registered representatives — said it fined Robinhood $57 million and ordered the stock trading app to pay nearly $13 million in restitution to thousands of clients.

"FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm's systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so," the organization said in a statement.

Robinhood — expected to go public sometime this year — suffered multiple days of outages beginning in early March of 2020, leaving clients unable to trade equities, options or cryptocurrency. The platform remained offline during some of the highest volume trading days amid the fastest bear market in history.

The popular online brokerage also faced criticism over the death of a 20-year old trader who killed himself after believing he racked up huge losses on Robinhood. The suicide was mentioned in the FINRA press release.

Robinhood neither admitted or denied the charges.

"Robinhood has invested heavily in improving platform stability, enhancing our educational resources, and building out our customer support and legal and compliance teams," Robinhood head of public policy communications Jacqueline Ortiz Ramsay said in response to the fine. "We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all."

Robinhood said it now has approximately 2,700 customer support staff, the brokerage said in a blog post. That is more than triple the staff it had during March of 2020.

The Menlo Park, California-based company forecasted this fine was coming and set aside $26.6 million for settlements, according to an annual audit filing with the SEC; however, the fine is more than double the amount reserved.

"The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood's violations, including FINRA's finding that Robinhood communicated false and misleading information to millions of its customers," said Jessica Hopper, executive vice president and head of FINRA's Department of Enforcement. 

Finra fined Robinhood $1.25 million in 2019 for best execution violations.

Robinhood is expected to go public in the coming months with a valuation north of $30 billion.

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