Three key points from Robinhood’s prospectus to understand its market positioning and growth potential

Listed valuation of $40 billion, Q1 crypto trading volume of $88 billion, 17% revenue share, with dogcoin contributing the most.

Three key points from Robinhood's prospectus to understand its market positioning and growth potential

Robinhood, a U.S.-based retail stockbroker, has filed with the SEC for an IPO to raise up to $100 million to go public on the Nasdaq under the symbol “HOOD”.

Three key points from Robinhood's prospectus to understand its market positioning and growth potential

The offering is led by Goldman Sachs, JP Morgan, Barclays, Citigroup, Wells Fargo, Mizuho and others, and Robinhood has set a valuation of at least $40 billion at the time of the IPO.

The Odaily Planet has also been looking through its prospectus to highlight the key points for readers.

  1. You can trade, but you can’t withdraw coins
    The IPO filing shows that Robinhood first launched cryptocurrency trading in five U.S. states in February 2018, with the first batch supporting only BTC and ETH transactions; as of March 31, 2021, its coverage has expanded to 46 states and Washington, D.C., and supports trading in seven different cryptocurrencies (BTC , ETH, BCH, BSV, LTC, ETC, DOGE), in addition to 10 others that provide cryptocurrency data (but do not support trading): OMG, LSK, BTG, DASH, XMR, ZEC, NEO, XLM, QTUM, XRP.

Note that, like Robinhood’s stock trading, crypto trading is also commission-free – it offers commission-free cryptocurrency trading through its subsidiary RHC – which sends customer orders to third-party RHC sends customer orders to third-party market makers for execution, reselling the order flow and liquidating the traffic. And, RHC does not currently allow clients to directly fund and withdraw fiat currency and cryptocurrency from RHC; clients must have both an RHF brokerage account and sufficient fiat currency funds in that brokerage account to fund cryptocurrency purchases through RHC; clients must also have a brokerage account to which they can credit proceeds from the sale of cryptocurrency by clients.

(Odaily Planet note: Paypal, the U.S. version of Alipay, can purchase cryptocurrencies, but also does not support cryptocurrency top-ups or withdrawals.

In the prospectus, Robinhood says “we may offer this functionality in the future,” but also expresses the same risks and concerns. “Allowing customers to store and withdraw cryptocurrencies on our platform may expose us to greater risk of violating trade sanctions, including OFAC regulations, as well as anti-money laundering and anti-terrorist financing laws.”

  1. Trading volume surges in Q1, with Dogcoin leading the way
    The prospectus shows that more than 9.5 million customers traded approximately $88 billion in cryptocurrency on Robinhood in the first quarter of 2021 alone; Robinhood held approximately $11.6 billion in cryptocurrency assets in custody at the end of the quarter, a 23-fold increase from March 31, 2020.
Three key points from Robinhood's prospectus to understand its market positioning and growth potential

It should be noted that Robinhood had 17.7 million total registered users at the end of the quarter, which means that more than half of its users are involved in cryptocurrency trading.

In addition, Robinhood generated $522 million in total revenue in the first quarter of the year, 17% of which came from transaction-based revenue earned from cryptocurrency trading. Bitcoin was the most traded cryptocurrency on the platform in nominal terms in the first quarter, but the bulk of revenue came from dogcoin, which accounted for 34 percent, compared to 4 percent in the fourth quarter of last year; revenue derived from dogcoin accounted for 6 percent of the company’s total revenue.

Robinhood also hinted at the risk in its prospectus. “If the dogcoin market deteriorates or the price of dogcoin declines and the demand for dogcoin transactions declines and is not replaced by new demand for other cryptocurrencies tradable on our platform, our business, financial condition and results of operations could be adversely affected.”

Of course, Robinhood remains optimistic about the crypto market as a whole, and does not rule out the possibility of further expansion of its cryptocurrency trading in the future. “We believe that as interest and adoption of cryptocurrencies grows, it will drive increased customer interest in our platform. Even within our current client base, we have a lot of room for growth.”

3 From the retail investor, to the retail investor
As an emerging force in the U.S. brokerage industry, Robinhood has always had a clear niche – targeting the retail investor. To that end, it has designed an easy-to-use user interface to help retail investors lower the barrier to entry into the stock market. In the prospectus, Robinhood states that “our business model is focused on making financial markets accessible to a broad range of retail investors.”

It was with this in mind that Robinhood first introduced commission-free trading for the benefit of retail investors. This move caused a huge tsunami in the industry, forcing other brokerages to adopt a zero-transaction-fee model.

In the prospectus, Robinhood also made a big move – to give back to platform users, it plans to allocate 20% to 35% of the Class A shares in its IPO to retail investors, who will be able to trade through a platform called Robinhood also made a big move – to give back to its platform users, it planned to allocate 20% to 35% of its IPO Class A shares to retail investors, who could subscribe through a new feature on Robinhood called IPO Access, truly living up to its philosophy of “from the retail investor to the retail investor.

However, Robinhood has also been in the crosshairs of public opinion this year. During the GME defense, Robinhood went down due to system overload and was branded as a “capitalist’s lapdog”; the same system failure occurred again during dogcoin trading, causing user dissatisfaction. In addition, due to a system display error (showing that users owed $750,000), Robinhood indirectly caused a user to commit suicide ……. These negative news caused serious damage to its brand.

Just one day before the IPO announcement, FINRA ordered Robinhood to pay approximately $70 million in fines and required it to compensate customers who allegedly suffered “extensive and substantial harm”. In its filing, Robinhood reported that it had reached an agreement in principle with regulators to pay $57 million in fines, but only $4.5 million in restitution to affected customers.

The answer to the question of whether Robinhood, which focuses on retail investors, will be recognized in the financial markets will only be revealed on the day of its IPO.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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