Robinhood publicly files its long-awaited IPO documents revealing staggering growth

Vlad Tenev, left, and Baiju Bhatt pose at company headquarters in Palo Alto, CA. Photo: Robinhood via Inc.
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Silicon Valley online broker Robinhood unveiled paperwork on Thursday for its flotation on the Nasdaq stock market under the ticker symbol HOOD.

The controversial investing app which was at the center of Wall Street’s recent retail trading frenzy surprised investors by enabling users to trade stocks and ETFs for free on its mobile app.

Founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhattin, Robinhood became more popular last year as amateur investing surged amid the coronavirus pandemic.

In December, Reuters reported that the app had picked Goldman Sachs Group Inc to lead preparations for an IPO, which could value it at more than $20 billion.

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In the papers filed on Thursday, Robinhood disclosed it had 18.5 million funded accounts and $80 billion in customer assets as of March 31, more than double the prior years. Over 50% of the users are first-time investors, and the founders said they plan to continue to make financial investing more accessible.

“We’d rather serve many small customers than a few large ones, and, while our competitors strive to go further ‘upmarket,’ we continue to see opportunity in serving those left behind, including underbanked customers, not just in the United States but all over the world,” they said in a letter to shareholders.

Robinhood makes money through a practice known as “payment for order flow,” in which retail brokers route trade requests to other firms to execute in exchange for a commission. Last year, Robinhood derived 75% of its total revenue from payment for order flow and transaction rebates.

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Robinhood was fined $65M last year by the U.S Securities and Exchange Commission for misleading customers about how it makes money

“One of Robinhood’s selling points to customers was that trading was ‘commission free,’ but due in large part to its unusually high payment for order flow rates, Robinhood customers’ orders were executed at prices that were inferior to other brokers’ prices,” according to a statement by SEC.

Thursday’s filing is one of the public’s first comprehensive looks at Robinhood’s financials. In 2020, its revenue grew 245% to hit $959 million, while it reversed losses to post a $6.3 million profit. However, the first quarter of 2021 saw a $1.4 billion loss, according to Business Insider.