Robinhood’s share price may have underperformed in the immediate aftermath of its IPO launch not that long ago. It may also have been memorable for the fact it was the worst performance for an opening day IPO on the US market for a company of its size, but since those early days the share price has seen a decent recovery.
At one point the shares rose to as high as $85 before slipping back sharply on reports that some shareholders were looking to sell up to 98m shares.
In Q1, the company posted a loss of $1.4bn, largely because of the $3.4bn of new debt that was raised in February, which it used in order to ensure the business met deposit thresholds required by the various clearing houses that handle the trading orders on its platform.
It appears that some of the investors who helped in the February fund raising wanted to take some profit on their stake, thus prompting the sharp pullback from the highs, however this attempt to sell these shares has now been put on the back burner by the SEC.
For Q2 the company reported a net loss of $502m, or $2.16c a share, with the losses predominantly a consequence of the fund-raising efforts it undertook at the beginning of the year. Total funded accounts came in at 22.5m for Q2 in line with forecasts, and up from 17.7m in Q1, with monthly active users at 21.3m, and total funds rising to $102bn.
Q2 revenues came in at $565m, a rise of 131%, helped by a big jump in crypto trading, which adding to the Q1 revenues which also came in above $500m, means that Robinhood has already exceeded revenues for the whole of 2020.
Robinhood saw a huge jump in crypto revenue, which came in at $233m, and made up 41% of revenue for Q2. While welcome this can’t disguise the fact that the meme stock income appears to have dropped back quite sharply, with equities trading declining to $52m.
Robinhood management seem all too aware of this given their cautious guidance for Q3 which has sent the shares sharply lower in after-hours trading, after closing the day higher. For Q3 the company said it expects lower trading activity across the industry to result in lower revenues.
Furthermore, the company said it will need to up its spending in regulatory and compliance functions, as well as setting aside up to $1bn in respect of stock-based compensation. In this quarter alone operating expenses rose to $501m, a sign of its success, but also the shape of things to come.