(Bloomberg) — Robinhood Markets Inc. filed publicly for an initial public offering, disclosing it became profitable last year only to have its losses skyrocket in the first quarter, in one of the most high-profile upcoming listings of the year.
The company, which pitches its trading platform to novice investors, listed the size of the offering as $100 million, a placeholder that will change when it sets terms for the share sale. Thursday’s registration statement follows Robinhood’s announcement in March that it had filed confidentially to go public.
It said in generated net income of $7.45 million on net revenue of $959 million in 2020, compared with a loss of $107 million on $278 million the previous year, according to the filing.
The company’s revenue surged during the first quarter, exceeding $522 million compared with $128 million for the same period last year, according to the filing. Its losses rose astronomically from $53 million for the three months ended March 31, 2019, to $1.44 billion in the most recent quarter.
Cryptocurrency trading on Robinhood was booming in the first quarter, with 17% of its total revenue involving transactions related to it.
The Financial Industry Regulatory Authority imposed a nearly $70 million fine on Robinhood on Wednesday, a record for the watchdog. Finra alleged Robinhood misled its customers about margin trading, and lapsed in its oversight of technology and approvals for options traders. Robinhood neither admitted nor denied the claims.
‘Meme-Stock Frenzy’
Robinhood’s appeal caught on during the coronavirus pandemic as homebound young people turned to online trading to pass the time and make money.
That increased popularity has led to scrutiny from politicians and regulators, who are focused on the so-called gamification of trading and the company’s role at the center of the meme-stock frenzy.
Robinhood also had to raise billions of dollars from its backers, in the height of a volatile late January frenzy over “meme stocks,” like GameStop Corp., that became popular on Reddit forums and trading apps.
The Menlo Park, California-based company said in the filing it will reserve 20% to 35% of its Class A shares for its customers.
The company will have two other classes of stock, with Class B shares carrying 10 votes each and Class C shares with no voting rights. All of the Class B shares will be held by executives and directors of the company after IPO, according to the filing.
Top Shareholders
Robinhood’s top shareholders are venture firms DST Global, Index Ventures, New Enterprise Associates and Ribbit Capital. Each group owns more than 5% of Robinhood stock leading into the offering.
Robinhood said in June that new directors would be joining its board including Jon Rubinstein, who helped create the iPod for Apple Inc. and is a director at Amazon.com Inc., Robert Zoellick, the former president of the World Bank and PricewaterhouseCoopers partner Paula Loop.
Robinhood was founded by two Stanford alumni Baiju Bhattand Vlad Tenev who met at the university. Both are sons of immigrants and raised in rural parts of the U.S.
The company’s credit lines include a $600 million revolver from banks including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, according to data compiled by Bloomberg.
The offering is being led by Goldman Sachs and JPMorgan. The shares are expected to trade on the Nasdaq Stock Market under the symbol HOOD.
(Updates with first-quarter losses in fourth paragraph)
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