No-fee trading app Robinhood revealed a massive $80 billion in customer assets amid blockbuster pandemic growth as it filed for its highly anticipated initial public offering on Thursday.
In an S-1 filing with the Securities and Exchange Commission, the controversial app said it plans to trade under the ticker “HOOD” on the Nasdaq after turning profitable for the first time last year.
Robinhood, which makes money selling its order flow to high-speed trading firms like Citadel Securities, turned profitable as it more than doubled the number of funded accounts on its platform as retail investors flooded the stock market to buy up so-called “meme stocks” like GameStop and AMC, it said.
Total funded accounts grew by by 151 percent to 18 million as of the end of March, up from 7.2 million a year earlier. Assets under management more than quadrupled to $80.9 billion from $19.2 billion over the same period.
The growth helped Robinhood generate a net income of $7.5 million on net revenue of $959 million in 2020 compared with a loss of $107 million on $278 million net revenue the prior year.
The online brokerage also revealed that it lost $1.4 billion in the first quarter of 2021 during the GameStop trading mania in January. Despite the loss, the company booked $522 million in revenue in the first quarter, up 309 percent from the same period a year ago.
Robinhood’s profitability could help it distinguish itself from other tech IPOs that fell flat in recent years as investors shunned growth stocks with no clear path to profitability.
The company on Thursday confirmed that its underwriters will reserve between 20 percent and 35 percent of its Class A shares for retail investors to buy through its IPO Access platform.
It also warned investors that a variety of factors could disrupt its business model, including ongoing investigations and legal proceedings, a slowdown in trading activity and regulatory action that could make it more difficult to Robinhood to make money via payment for order flow, a controversial practice that lets the company farm out trades in exchange for payment.
And while the app’s popularity has soared over the past 18 months, it’s faced increased scrutiny and criticism from some who say it has sought to gamify the market.
The filing comes just a day after the Financial Industry Regulatory Authority slapped Robinhood with a record $70 million charge to settle allegations that it misled customers about margin trading, which is when investors borrow money to trade.
The Menlo Park, California-based was founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt with the goal of making investing in the stock market more accessible by eliminating hefty commission fees.
From 2015, more than half of the customers funding accounts on Robinhood said it was their first brokerage account, the company said in its filing Thursday.