Robinhood has filed for its IPO, and the popular investment platform is boasting unexpected profitability – and warning of the potential Dogecoin risk. It’s been a hectic year or so for the company, which now says it turned a small $7.45 million profit in 2020, compared to $107 million in losses the previous year.
That’s based on a significant revenue jump, mind. In 2020, Robinhood disclosed today, it generated $959 million in revenues; in 2019, that figure was $278 million.
As expected, the Robinhood S-1 filing doesn’t just set out the company’s stall for why investors might want to consider its stock, but also lists a litany of potential issues it could face. Key among those is the volatile world of cryptocurrency, an area where Robinhood has seen particular interest from amateur investors. In particular, Dogecoin is called out as a specific area of possible concern.
“For the three months ended March 31, 2021, 17% of our total revenue was derived from transaction-based revenues earned from cryptocurrency transactions, compared to 4% for the three months year ended December 31, 2020,” Robinhood’s S-1 reveals. “While we currently support a portfolio of seven cryptocurrencies for trading, for the three months ended March 31, 2021, 34% of our cryptocurrency transaction-based revenue was attributable to transactions in Dogecoin, as compared to 4% for the three months ended December 31, 2020.”
As Robinhood portrays it, that’s a level of new risk on top of the already at-times precarious cryptocurrency market. After all, $DOGE has been shown to be particularly variable based on high-profile investors, with mere tweets from Tesla’s Elon Musk sufficient to send the price rocketing up – or, indeed, crashing down.
“As such, in addition to the factors impacting the broader cryptoeconomy described elsewhere in this section,” Robinhood adds, “RHC’s business may be adversely affected, and growth in our net revenue earned from cryptocurrency transactions may slow or decline, if the markets for Dogecoin deteriorate or if the price of Dogecoin declines, including as a result of factors such as negative perceptions of Dogecoin or the increased availability of Dogecoin on other cryptocurrency trading platforms.”
Now, it’s worth remembering that pessimism is the order of the day when it comes to SEC risk assessments. Businesses are required to list out every possible challenge, hurdle, or other potential pratfall that could affect them: that, after all, is why it’s called the “Risk Factors” section. Robinhood also calls out everything from the COVID-19 pandemic, through SEC and other regulator demands, to even just a potential loss of reputation that could dampen investor interest.
Nonetheless it’s worth noting just how important Dogecoin has become as a proportion of Robinhood’s crypto business, and remembering that – unlike, for example, Bitcoin – the so-called meme stock has no theoretical limit on mining. Robinhood has previously cracked down on crypto trades in an attempt to pacify turbulent trading, finding itself the target of investor ire after limiting purchases and holdings of certain popular shares.
Robinhood plans to list under $HOOD on the NASDAQ when it finally goes public. The company recently agreed a $70 million fine – the largest ever imposed by the Financial Industry Regulatory Authority (FINRA) – over claims it misled investors with false information, and caused harm with various outages in March 2020.