Robinhood reveals skyrocketing loss this year after 2020 profits

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(Bloomberg) – Robinhood Markets Inc. has filed for an initial public offering, revealing that it turned profitable last year only to see its losses increase in the first quarter, in one of the upcoming listings. most publicized of the year.

The company, which is showcasing its trading platform to novice investors, said the size of the offering was $ 100 million, a placeholder that will change when it sets the terms for the sale of shares. Thursday’s recording statement follows Robinhood’s announcement in March that it had filed a confidential dossier to be made public.

Robinhood said it generated net income of $ 7.45 million on net income of $ 959 million in 2020, compared to a loss of $ 107 million from $ 278 million the year before, according to the filing.

The company’s revenue surged in the first quarter, topping $ 522 million from $ 128 million for the same period last year, according to the filing. Its losses, however, have increased astronomically, from $ 53 million in the quarter ended March 31, 2019 to $ 1.44 billion in the most recent quarter. The loss was primarily attributable to an adjustment in the fair value of convertible notes and warrants liabilities, the company said in the filing.

Cryptocurrency trading on Robinhood was booming in the first quarter, with 17% of its total revenue involving related transactions.

Robinhood’s potential valuation will be clearer when it discloses how many shares it plans to sell and the proposed price range for those. Bloomberg Intelligence analyst David Ritter said the company could be worth up to $ 40 billion.

‘Meme-Stock Frenzy’

Robinhood’s call was felt during the coronavirus pandemic as homebound youth turned to e-commerce to pass the time and make money. Its monthly active users have more than doubled in the past year, to 17.7 million in the first quarter, compared to 8.6 million in the same period last year.

This growing popularity has led to close scrutiny from politicians and regulators, who are focused on the so-called gamification of commerce and the role of business at the center of the meme stock frenzy.

Robinhood has also had to raise billions of dollars from its backers, at the height of a volatile frenzy in late January over “memes stocks,” like GameStop Corp., which has become popular on Reddit forums and apps. trading.

The Financial Sector Regulatory Authority on Wednesday fined Robinhood nearly $ 70 million, a record for the watchdog. Finra alleged that Robinhood misled its clients about margin trading and breached its oversight of technology and approvals for options traders. Robinhood has neither admitted nor denied the allegations.

Young, Various

Robinhood declares in its dossier that its mission is to “democratize finance for all”.

Robinhood was founded by two Stanford alumni, Baiju Bhatt and Vlad Tenev, who met at university. Both are sons of immigrants and grew up in the rural United States.

“The next generation of investors are younger and more diverse than ever, and finance is now as culturally relevant as music and the arts,” Tenev and Bhatt said in a letter to investors.

The company warns in its documents, however, that “adverse publicity has in the past harmed and may in the future damage our reputation”.

The Menlo Park, Calif., Based company said in the filing that it would reserve 20 to 35 percent of its Class A shares for its clients.

The company will have two other classes of shares, with class B shares carrying 10 votes each and class C shares without voting rights. All Class B shares will be held by the officers and directors of the company after the IPO, according to the record.

Main shareholders

The main shareholders of Robinhood are venture capital firms DST Global, Index Ventures, New Enterprise Associates and Ribbit Capital. Each group owns more than 5% of the shares of Robinhood leading to the offer.

The listing gives new impetus to the 2021 IPO market. So far, companies, including blank check companies, have raised more than $ 200 billion on US exchanges, the most loaded never recorded, according to data compiled by Bloomberg. Consumer-oriented companies such as Warby Parker Inc., Sweetgreen Inc. and Allbirds Inc. are expected to make their public debuts later this year, Bloomberg News reported.

Robinhood said in June that new directors would join its board, including Jon Rubinstein, who helped build the iPod for Apple Inc. and is a director of Amazon.com Inc., Robert Zoellick, the former chairman of the World Bank and PricewaterhouseCoopers partner Paula Boucle.

Bank creditors

The company’s lines of credit include a $ 600 million gun from banks such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg.

The Robinhood offering is led by Goldman Sachs and JPMorgan. Its shares are expected to trade on the Nasdaq Stock Market under the symbol HOOD.

(Updates with active users in the sixth paragraph)

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