In its initial public offering, Robinhood, the fee-free cryptocurrency, stock, and options exchange, raised about $2 billion, valuing the company at $32 billion. Despite the fact that the company is worth more than Nasdaq, the IPO fell short of the estimated $35 billion valuations. Today is the first day of trading for Robinhood, which will trade under the ticker HOOD.
Robinhood Misses a $35 Billion Valuation Opportunity Goal
The fee-free investment app Robinhood has completed its IPO, raising over $2 billion. The company, however, fell short of its target of a $35 billion valuation, with shares selling at $38, at the low end of the targeted $38-$42 range.
Users of the exchange were able to purchase a third of the available shares before the market opened, which is unusual in these situations.
While Robinhood did not meet its goal, its valuation was substantially greater than it was during its previous investment round, when the business was valued at $12 billion. The company is presently in the middle of its competitors, with a valuation that is higher than Interactive Brokers ($26 billion) but lower than Charles Schwab ($130 billion).
Robinhood took advantage of the interest and expansion in the stock and cryptocurrency markets in the first two quarters of the year, leveraging its fame as one of the first exchanges to offer zero-fee trading, causing an industry shift. However, some analysts believe that this price is unsustainable in the long run. Renaissance Capital’s Kathleen Smith commented, “It appears rich — unless the company can keep up this strong growth.”
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The Cryptocurrency Market at Robinhood
While options trading accounts for 38% of Robinhood’s revenue, cryptocurrency-related trading accounts for a significant portion of the company’s earnings (17%). Robinhood has grown at an exponential rate in this regard. Customers traded $88 billion in the first quarter of the year, according to the preliminary prospectus filed with the SEC for the company’s IPO. As a result, Robinhood now has about $12 billion in cryptocurrency under its control for its subscribers.
Regulators are concerned about Robinhood’s large bitcoin trading activity. According to persons familiar with the situation, the SEC postponed Robinhood’s initial public offering due to concerns about how the company handled this line of business. Because its CEO, Vlad Tenev, is not licenced by FINRA, Wall Street’s watchdog, Robinhood is currently under scrutiny. Tenev, on the other hand, is not required to register with Robinhood because he is the CEO of Robinhood Markets, not it’s trading business, Robinhood Financial. The investigation is still ongoing.
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