Options trading makes up about 38% of revenue, while crypto is 17% of revenue. Robinhood, which offers equity, cryptocurrency and options trading, as well as cash management accounts, benefits from more speculative trading practices from its clients. "We expect our revenue for the three months ending September 30, 2021, to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies, during the three months ended June 30, 2021, and expected seasonality," Robinhood said in an amended prospectus released last week. Robinhood warned in its updated prospectus that the brokerage could see a slowdown in its epic growth as the retail trading boom cools. Index Ventures has roughly 13%, NEA has about 13% and Ribbit Capital has approximately 10% of pre-IPO ownership. Top investors include DST Global, which owns about 9% of Robinhood pre-IPO. Robinhood co-founders Tenev and Baiju Bhatt each are planning to sell about $50 million worth of shares in the IPO. The six prior ones are trading below their IPO prices. Robinhood will likely be the seventh IPO of 2021 to raise more than $2 billion. "I am betting that several of these institutional investors will take a pass especially at a significant valuation step-up from just a few months ago," Erickson said. The traditional IPO is rapidly becoming a thing of the past amid the rise in direct listings and special purpose acquisition companies. Robinhood is the latest company to change the structure of public offerings. Goldman Sachs and JPMorgan are the lead bankers on the deal. However, Robinhood is such a high-profile IPO that it's worth it for the underwriters. The company's executives invited everyday investors to join the call and spoke on topics from a pool of 2,000 questions.ĭavid Erickson, a finance professor at the University of Pennsylvania's Wharton School, said investment banks typically don't like novelty in the IPO process. Robinhood even had a public virtual roadshow over the weekend, an event historically reserved for investment banks and high-net-worth individuals. After three months, investors can sell another 15%. Employees will be able to sell 15% of their shares immediately after the public debut, compared with the traditional six-month lockup period. Robinhood's loose lock-up structure is also unconventional. The more sells to retail, the more susceptible they will be to some sort of Reddit super squeeze type of activity," Greg Martin, managing director and co-owner at Rainmaker Securities, told CNBC earlier this month. "There's no doubt that retail traders are much more fickle. However, some analysts said Robinhood may be leaving itself exposed to the whims of the very amateur investors it's trying to help. Retail traders typically don't have a way to buy into newly listed companies until those shares begin trading on an exchange, so they miss out on the pop. IPO shares have historically been set aside for Wall Street's institutional investors or high-net-worth individuals. The stock trading app is reserving 20% to 35% of its IPO shares for its own clients, which CEO Vlad Tenev said he expects will be one of the largest retail allocations ever. Robinhood's longstanding mission is to lower the barrier to enter the world of finance, and its IPO has been nothing but on brand. Autonomous Research estimates Schwab accounts are worth more than $3,600 per funded account. This compares with $2,500 per account for E-Trade, which was purchased by Morgan Stanley, and $2,200 per account for each TD Ameritrade account, based on Schwab's purchase price, according to the MKM analysis. Robinhood's IPO pricing implies a roughly $1,350 valuation per active and funded account, based on its estimated 22.5 million accounts as of the second quarter of 2021. While Robinhood was successful in acquiring clients who were largely left behind by legacy brokerages, their account balances are lower compared with peers, which should give Robinhood a lower valuation, according to MKM Partners. "We size the money app opportunity at in revenues implying Robinhood has a significant runway for growth." households with in wealth that existing retail brokers have largely ignored," Bolu wrote in a research report. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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