Robinhood Warns Retail Slows Down, Particularly In Cryptocurrencies

In this photo illustration, the Robinhood Markets logo is seen on a smartphone and PC screen. (Photo illustration by Rafael Henrique / SOPA Images / LightRocket via Getty Images)

SOPA Pictures | LightRocket | Getty Images

The Robinhood stock trading app – which is expected to go public as early as next week – has warned of a potential slowdown in trading income and new clients as the retail investment boom begins to slow.

“We expect our revenues for the quarter ended September 30, 2021 to be lower than the quarter ended June 30, 2021, due to lower levels of trading activity from record levels of trading activity, in particularly in cryptocurrencies, during the three months ended June 30, 2021, and the expected seasonality, ”Robinhood said in a prospectus published Monday.

The slowdown comes from booming levels. The Menlo Park, Calif., Free trade pioneer estimates second-quarter 2021 revenue to be between $ 546 million and $ 574 million. This would be an increase of 129% from the $ 244 million in the second quarter of 2020. The second quarter results are expected to be lower than the $ 522 million in revenue generated in the first quarter of this year.

However, the company estimates a net income loss of between $ 537 million and $ 487 million in the second quarter of 2021, compared to a loss of $ 1.4 billion in the first quarter.

Robinhood – which offers trading in stocks, cryptocurrencies and options, as well as cash management accounts – benefits from more speculative business practices on the part of its clients. Options trading accounts for around 38% of income while crypto accounts for 17% of income. Additionally, levels of margin trading and stock lending were high in 2021.

A stagnation in options, margin trading and crypto – with bitcoin priced below $ 30,000 – could hurt Robinhood’s growth as it heads into one of the biggest public debuts in the world. year.

Robinhood also said that he expected the growth rate of new clients to be lower in the third quarter of 2021, compared to the second quarter, “due to the unusually strong interest in trading, particularly in cryptocurrencies. , which we have experienced in the three months ended June 30, 2021 and the seasonality of overall business operations, ”said S1.

Robinhood expects its app to have 22.5 million funded accounts – those linked to a bank account – in the second quarter, up from a total of 18 million in the first quarter of 2021.

Robinhood – whose long-standing mission is to ‘democratize’ investing – has seen record levels of new, younger traders entering the stock market during the pandemic. This surge continued in 2021, marked by frantic exchanges around so-called memes actions.

The company hinted at clients who created accounts around GameStop’s short squeeze in January, but may have stopped trading as the frenzy died down.

“We have experienced strong growth in the number of new customers in the first six months of 2021,” the file said. “We do not know if, in the long run, the cohorts made up of these new clients will have the same characteristics as our previous cohorts. As long as these new clients do not increase their cumulative net deposits or their frequency of trading on our platform. As new clients have joined in previous periods, our ability to expand and develop our relationship with these clients will be affected. ”

Robinhood is looking for a market valuation of up to $ 35 billion on its next IPO. The stock trading app will attempt to sell its share in a range of $ 38 to $ 42 per share.

– with reporting from CNBC’s Kate Rooney.

Robinhood is a quintuple CNBC 50 disruptor company that topped this year’s list.

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