The Robinhood ($HOOD) IPO on Nasdaq

Robinhood, the financial services company that became infamous for offering commission-free trades, has gone public on the Nasdaq stock exchange.

RobinHood ($HOOD) debuted at $38 per share and a total of 55,000,000 shares were sold, which means the net proceeds from the IPO are approximately $1.89 billion; 52,375,000 of the shares are being offered by Robinhood and the other 2,625,000 are being offered by existing stockholders. Both Robinhood co-founders, Vlad Tenev and Baiju Bhatt, sold roughly $50 million worth of stock.

Overall, Robinhood’s IPO gives the company a valuation of roughly $32 billion–a value that is 63% greater than its September 2020 valuation of $11.7 billion.

How does Robinhood make money?

To generate revenue, Robinhood controversially sells its user’s order flow to brokerage firms, it also offers options trading accounts which make up about 38% of revenue, equities trading which makes up about 25% of revenue, and cryptocurrency trading which accounts for 17% of revenue.

Despite a giant leap in revenue in Q2 2021 (revenue between $546 and $574 million) compared to Q2 2020 (revenue of $244 million), Robinhood is expecting a net loss of $487 million to $537 million for Q2 2021.

Robinhood executives have voiced that the downturn in market activity will be a contributing factor to the loss it expects to sustain for Q2 2021; as the equities and digital currency markets continue to cool off, Robinhood will rake in less trading revenue and expects fewer new users to join the platform.

When it comes to cryptocurrency, Robinhood warned the world that its revenues could take a significant hit due to Dogecoin; although Robinhood offers 7 digital currency trading pairs, 34% of its cryptocurrency-based revenue came from Dogecoin trading.

“34% of our cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin, as compared to 4% for the three months ended December 31, 2020. As such, in addition to the factors impacting the broader cryptoeconomy described elsewhere in this section, Robinhood Crypto’s (RHC) business may be adversely affected, and growth in our net revenue earned from cryptocurrency transactions may slow or decline, 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,” said Robinhood in its S-1 filing.

Robinhood’s controversial practices

Robinhood is one of the most popular financial service providers in the United States, especially among younger generations. However, many people and regulators criticize some of Robinhoods practices. Recently Robinhood has settled with several regulators to terminate ongoing investigations into its operations.