Revenue in 2019-2020
Invest in IPO Robinhood
Robinhood is an American company, founded by two by Stanford students in 2013 and disrupted the brokerage market. Its main product is a commission-free investment platform, which can be easily accessed from a mobile phone or PC. Mission of the founders was to democratize finance for all.Robinhood was the first company that introduced the concept of zero commissions and for years remained the only player in the blue-ocean market.
Due to its commission-free model, customers perceive Robinhood as a heck of a guy in the financial markets and actively promote the company through the word of mouth. As of February 2021 platform comprises nearly 18 million loyal users. It is especially popular among millennials who adopted the company as their first brokerage thanks to its usability and absence of fees. Robinhood’s platform offers a suite of financial services products including: Investing Solutions, which besides the traditional instruments also offer access to the IPOs, Cryptocurrency (company offers seven cryptocurrencies: Bitcoin, Bitcoin Cash, Bitcoin SV, Dogecoin, Ethereum, Ethereum Classic and Litecoin), Robinhood Gold, launched in 2017, is a monthly paid subscription service that provides customers with premium features, Robinhood Cash Management and Learning & Education Solutions to help to educate Robinhood community on investing and broader financial success and well-being.
Robinhood’s current focus is its retail brokerage, cryptocurrency trading and cash management offerings. U.S. retail investors are estimated by Charles Schwab to have total assets of approximately $50 trillion, implying that Robinhood still has sub 2% market share of all U.S. retail assets. Retail investing now comprises roughly 20% of U.S. equity trading volume, doubling in the decade from 2010 to 2020.
As of March 31, 2021, cryptocurrency market capitalization has grown to $1.9 trillion, up from $450M when Robinhood launched cryptocurrencies in February 2018
Robinhood has a great growth potential among its main target customers, as only 25% of America’s 72M millenials have Robinhood accounts. The growth is expected not only in the number of new users but also in the amount of capital invested, as net earnings and savings are increasing rapidly at the current stage of life of millenials. Robinhood is evolving from a discount stockbroker into a complete financial platform that can serve all the financial needs of the customer, including loans, insurance, etc. As the company will transform its business by providing more financial services both traditional and emerging ones, it may become a serious threat to (disrupt) the traditional banks, which are weak in innovating and consequently can not keep up with changing customer needs. Total global wealth outside of the U.S., as of mid-2019, has been estimated at over $250 trillion, according to the Credit Suisse Research Institute. Despite being unsuccessful in extending their product beyond the U.S. to date, it is clear the opportunity to democratize finance exists globally and Robinhood has clear ambitions to move beyond the U.S.
Robinhood grew uncontested for many years, but in late 2019 incumbent brokerages as Charles Schwab and Fidelity family matched it on price. As a consequence, the brand and user experience, rather than economic benefits became the main value drivers.
With this new competitive landscape, reputation, customer loyalty, and brand image are vitally important. And even one single event can spoil them significantly. An example of such an event was the popping of several stocks, such as Gamestop, AMC and Nokia. During the “memestock” hype in late January into early February 2021, Robinhood had trading outages on major stocks like GameStop and AMC and increased capital requirements from National Security Clearing Corporation (NSCC), which led Robinhood to raise over $3 billion in two convertible notes in February of this year. Just last week, Financial Industry Regulatory Authority (FINRA) fined Robinhood $70 million for outages and misleading customers, the largest-ever FINRA penalty.
Robinhood’s innovative model of commission-free stock trading has not come without controversy including questions from the public and regulators on its payment for order flow (PFOF) business model. SEC investigates this model, because the broker might be routing orders to a particular market maker for their own benefit, and not in the investor’s best interest. Until the company diversifies its sources of revenue, any regulatory or market change that threatens order flow payment could negatively impact Robinhood.
Company plans to raise $2.2 billion by offering 55 million shares (5% secondary) at a price range of $38 to $42. Robinhood Markets would command a fully diluted market value of $36.8 billion, or a basic market cap of $33.4 billion. It plans to list on the Nasdaq under the symbol HOOD. Goldman Sachs, J.P. Morgan, Barclays, Citi, and Wells Fargo Securities are the joint bookrunners on the deal.
Robinhood has raised $5.58 B to date from top-tier investors, including Sequoia Capital, D1 Capital, Andreessen Horowitz, and others.
The company's revenue more than tripled to $958.8 million last year, up sharply from $277.5 million in 2019. That momentum propelled Robinhood to swing to a profit in 2020 when it recorded a net income of $7.4 million, compared to net loss of $106.6 million in 2019.Robinhood saw strong growth in the first quarter of this year, as its revenue quadrupled to $522 million, up from $127.6 million in the year-ago period. But the company recorded a loss of $1.4 billion, compared to a $52.6 million in the same quarter last year. Robinhood saw operating expenses more than double in the quarter to $463.8 million from $180 million in the year-ago quarter.With the explosion of interest in crypto, crypto has been a big area of growth for Robinhood. Cryptocurrencies represented 20.8% of Robinhood's total transaction revenue as of March 31, not far behind equities at 31.7%. (Crypto was just 4.4% of transaction revenue in the year-ago period.) Options made up 47.1%.Meanwhile, crypto was 14.3% of Robinhood's assets under custody as of March 31, 2021, up from 2.5% in the year-ago period. We estimate that Robinhood’s revenue will reach $2-3 B by late 2021. The current market sentiment of disruptive fintech platforms is extremely positive, and they are evaluated at high revenue multiples. For instance, fintech startup Affirm that was listed in January 2021 is currently traded at 28x run-rate revenue. The most popular crypto exchange in the U.S. Coinbase (COIN) also went public this year and despite the correction in cryptocurrency, its market capitalization equals to $. 47B. Given its innovative product and business model, continued controversy and cultural relevance, Robinhood is one of the most highly anticipated U.S. consumer IPOs in 2021. Although Robinhood’s transaction-based revenue model exposes it to revenue volatility, the overall market size and trend toward democratizing finance via access on a mobile phone feels to be a powerful long-term trend and should position Robinhood to continue to compound growth for years to come. We estimate that during the IPO it can be valued at $50-70 B, yielding 80% upside from the entry price.
2-3 weeks before the start of the company publishes information about the opening of trading: financial statements for 3 years, a description of the company's business, plans for the future, as well as the risks that management sees in their own business. We analyze such offers and publish the best ones. Investors apply for deposits. Before the deadline for applications, you can change the request or cancel it.
We submit one large application for the purchase of shares by pre-subscription with reduced price to large investors. The application may be rejected in part or in full. Over the past three years, our applications have been rejected only three times. The next day, or every other day, we'll know at what price and at what percentage the order is executed, and we'll post it on «The my investment page».
The price of shares is rising from the first day due to the demand of investors deprived of the opportunity to buy shares before trading. Most of the stocks we've been recommending buying over the past three years have been starting to trade on the stock exchange at tens of percent higher than the price at which customers bought the shares. There comes a Lock up period when it is forbidden to sell shares purchased by subscription. Typically lasts 3 months.
After the expiration of the Lock Up period, the investment is automatically closed and the investor receives a profit on account of the deduction commissions UT. You can always view the results of your past investments in investment archive.
Although no shares are allowed to be sold during the lock-up period, our traders seek to offer investors fixed profit by way of using various financial instruments, including forwards, options, short positions etc.
From the investor’s point of view this means that he or she may close an investment by paying a certain part of its value (as a rule, approximately 15 percent). This is due to high prices for the instruments which are employed to ensure availability of fixed profit. As such, you shall press any relevant button in the Investor Account as soon as it is active.
The closing procedure is similar to commencement of investment business. You shall file a bid which is executed within a business day by UT. So, your investment is closed at the price currently prevailing on the stock exchange. However, we rarely recommend using this feature, since upon expiry of an applicable lock-up period the average performance is higher.
3 per cent of the share price. This fee is charged as soon as your investment bid is confirmed.
1.75 per cent of the purchase price paid for your shares as soon as trading is closed. This fee is charged upon closure of any relevant investment.
20 per cent of the profit your derive. This fee is charged only if you show positive performance as of the moment any relevant investment is closed.
TO EARLY EXIT
Usually, 15 per cent (depends on the stock exchange environment). It is calculated per each investment individually.
Our risk managers ensure proper support throughout the entire transaction.
IN THE PROFIT FROM THE FIRST DAY
Such an approach allows it to limit extra risks related to bankruptcy of start-ups and considerably increase profit vs investors purchasing shares on open Market.
LOW ENTRY THRESHOLD
Millions of dollars are required to buy shares on a subscription basis. We have generated a pool of traders and investors which enables any newbie to participate in any transaction as aforesaid by investing just USD50 or more.