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Summary
- Robinhood Markets Inc raised $2.1 billion in its IPO on 28 July.
- The stock-trading app’s active monthly users increased to 21.3 million as of June-end from 11.7 million seen in December-end.
- Its shares would begin trading 29 July onwards under the ticker HOOD on the Nasdaq stock exchange
In its initial public offering (IPO) on 28 July, Robinhood Markets Inc raised $2.1 billion. Its shares would begin trading 29 July onwards under the ticker HOOD on the Nasdaq stock exchange.
The stock-trading app had an eventful year. As retail investors flocked to the app, its customer base grew. However, the company has had to deal with flagged regulatory risks. It also admitted that a revenue hit was probable post the dying down of the retail-trading frenzy, as the world would move towards normalcy post-pandemic.
Copyright © 2021 Kalkine Media
Robinhood’s beginning
Robinhood wanted to capitalise on the fascination with cryptocurrencies like GameStop Corp that saw huge volatility due to trading speculations. The stock-trading app’s active monthly users increased to 21.3 million as of June-end from 11.7 million seen in December-end. The IPO gave a valuation of $31.8 billion to the company, which was more a function of its revenue compared to some of its traditional rivals like Charles Schwab Corp.
In the last one-and-a-half year, investors filed over 90 lawsuits against the company accusing that the company’s actions were unlawful and unfair and unlawful, according to reports. Some investors chose to lie low over concerns regarding regulator crackdown on the business, apprehensions regarding frothy valuation, as well as dissatisfaction regarding curbs imposed by Robinhood on trading when frenzy around meme stock trading flared up in January-end.
Robinhood as an investment
The company’s revenues increased 245 per cent to $959 million last year. In the first quarter of 2021 itself, it hit $522 million which was over quadruple compared to the year-ago level. Till 31 March 2021, the company had cryptocurrency assets worth roughly $12 billion, about 23 times higher than a year ago. In the same period, over 9.5 million customers traded around $88 billion in digital currencies on the app's platform.
Robinhood is on a mission to democratise finance. In a filing before the IPO, the company had said that the excessively high retail allocation could result in share volatility, making it similar to a meme stock itself. Regulators are still trying to find out the reason behind the volatility seen in meme stocks and why that happened.
A reason why the app was popular among users was that it did not need big balances to do trade, nor did it charge trading commissions. In the first quarter, it made 81 per cent of revenue by channelling orders by an investor towards established trading firms like Citadel Securities, which conduct the other aspect of the trade. Such firms made a payment to Robinhood.
According to Robinhood, in the IPO, it sold 55 million shares priced at $38 each, which was the lower range of the $38 to $42 band. The stock-trading app has become one of US’ most valuable going public year-to-date in a market set for new listings. The company said that 20 to 35 per cent shares of the company would be reserved for its users in an unconventional move.
How to buy
To buy Robinhood’s shares, you need a brokerage account and knowledge on how to trade in shares. The shares of Robinhood would begin trading on NASDAQ from 29 July 2021.
Once you have a trading account, you need to decide on how many shares you would want to buy. The quantum should be finalised based on your finances and not the price of the share. Once the details on your order type are given to your brokerage platform, you can start buying and selling the stocks of Robinhood.
