Robinhood seeks $35B IPO valuation to cap year of record revenue

The news: The US trading fintech giant estimates that it will raise $2 billion from the sale of its Class A common stock, per its updated SEC filing.

Zooming in on its finances: Going into the public market, Robinhood can boast of its relentless revenue growth.

Its total revenue grew 245% in 2020 to $959 million. For Q1, it already has reached $522 million, indicating the likelihood of even higher revenue by the end of 2021.

Likely it owes some of its success to riding the crypto investing wave, as 9.5 million customers traded cryptos on its app in Q1, up from 1.7 million in the previous quarter. For context, Robinhood almost doubled its user base, reaching 17.7 million users in Q1 compared to the same quarter last year.

Buy Robinhood IPO stock on Robinhood: The fintech will reserve between 20% and 35% of its common stock for its IPO investing platform, IPO Access, enabling its own users to invest in its public debut.

Allowing users to profit from its growth will help Robinhood shore up its customer relationships—a move much-needed after a year of controversies: Robinhood was recently hit with a $70 million fine for app outages and misleading users, resulting in its base sustaining high trading losses.

Looking ahead: Although Robinhood’s growth has been impressive up to its IPO launch, investors will likely be speculating on whether it will continue beyond the unusual conditions created by the pandemic.

DriveWealth, which powers the underlying infrastructure for stock trading among fintechs like MoneyLion, Stake, and Revolut, reported a slowdown in trading for April and May following Q1’s record. Meanwhile, global crypto trading volumes were also down 40% in June.

DriveWealth has identified everyday consumers as the culprit for the slowdown. Now that they’ve been vaccinated, they are stepping away from day trading and resuming their prepandemic activities. In Robinhood’s SEC filing, it admits that it expects “revenue for Q3 to be lower than Q2 as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptos, during Q2.”

The dip suggests that the days of record-breaking trading volumes and account openings are done. We’re now moving toward a slowdown. Digital brokers like Coinbase, eToro, Acorns, Bullish, and now Robinhood have seen the writing on the wall and are rushing to go public and capitalize on the trading hype to attract investors.