Online brokerage firm Robinhood unveiled its “S-1” IPO filing after clearing comments with the US SEC on its first confidential filing made back in March, which included some interesting facts and figures about the company which has shaken up the world of retail brokerage.
Robinhood reported that it holds $81 billion of client assets (as of March 31, 2021) up from just $14 billion as at year-end 2019. The pandemic era has clearly been very good for Robinhood. Interestingly, Robinhood noted that more than 50% of its 18 million customers were first-time investors. The company reported that there were 17.7 million active users on the platform in the latest month for which figures are available (March 2021).
The company believes that close to 50% of all new retail funded accounts opened in the United States from 2016 to 2021 were new accounts created on Robinhood, based on new account data from publicly reporting peer brokerages.
Robinhood didn’t give any indication as to the valuation it expects, or the size of the offering, but market buzz is that it will be in the $40 billion range. In its last financing round earlier this year Robinhood raised $3.4 billion valuing the company at about $12-13 billion. Robinhood rival eToro announced plans to go public, via a SPAC merger, at a valuation of just over $10 billion.
Robinhood said that its mission is to democratize finance for all. The company was founded on the belief that everyone should be welcome to participate in the financial system, and thus the founders set out to create a modern financial services platform for everyone, regardless of their wealth, income or background. Systemic barriers to investing, like expensive commissions, minimum balance requirements and complicated, jargon-filled paperwork, have dissuaded millions of people from feeling welcome or able to participate until now.
Robinhood said that it has set out to change this. It uses technology to deliver a new way for people to interact with the financial system. The company believes investing should be familiar and welcoming, with a simple design and an intuitive interface, so that customers are empowered to achieve their goals. It believes that the Robinhood app now makes investing approachable for millions.
Indeed, Robinhood has been successful not only in building its own business but in changing the retail brokerage industry in the US and worldwide. The company forced the hand of most its older US rivals – E*Trade, TD Ameritrade, Charles Schwab, and Fidelity – to drop per-trade commissions. It also inspired a number of “Robinhood rival” firms in countries around the world.
In its filing Robinhood also noted its cultural impact. The company pioneered commission-free stock trading with no account minimums, which the rest of the industry emulated. The company claimed that over half of 18-44 year olds in the United States know who Robinhood is according to an internal brand study conducted in March 2021. As a further sign of its relevance today, Robinhood reached the number-one spot on the Apple App Store multiple times in the first quarter of 2021 and was frequently ranked number one in the Finance category on the Apple App store during 2020 and the first quarter of 2021.
The Robinhood platform, which began as a U.S. stock-focused retail brokerage, currently offers:
• trading in U.S. listed stocks and Exchange Traded Funds (“ETFs”), as well as related options and American Depositary Receipts (“ADRs”);
• cryptocurrency trading through subsidiary Robinhood Crypto, LLC (“RHC”);
• fractional share trading, which enables customers—regardless of budget—to build a diversified portfolio and access stocks previously out of reach;
• recurring investments, which help customers make investing routine and employ dollar-cost averaging;
• Cash Management, which includes Robinhood-branded debit cards and enables customers to save and spend by paying bills, writing checks, earning interest, withdrawing funds via ATMs and receiving Federal Deposit Insurance Corporation (“FDIC”) pass-through insurance on cash swept from their brokerage account; and
• Robinhood Gold, a monthly paid subscription service that provides customers with premium features, such as enhanced instant access to deposits, professional research, Nasdaq Level II market data and, upon approval, access to margin investing.
The Robinhood IPO is being led by investment bank Goldman Sachs. The company plans to list on NADSAQ using the ticker symbol HOOD.