Robinhood is intending to go public in July 2021, as plans for a June initial public offering slipped by the wayside. According to Yahoo! reports, the company is intending to time its IPO to suit people returning from July 4 holiday travel in the US.
Although the trading app’s SEC filing is yet to be made public, parallels are already being drawn between the platform and Coinbase’s public launch in April 2021.
The arrival of Coinbase onto the Nasdaq was set to be a watershed moment for the world of crypto, with widespread hope that the listing would bring a new level of legitimacy to a market that is still associated with uncertainty and mystery among retail investors.
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However, despite some early optimism, Coinbase’s stock price has plummeted 29.4% since its listing. Compounded by the faltering price of Bitcoin and a significant climb down from its mind-boggling $99.6bn valuation upon launch, the hopes of a Coinbase boost to confidence in cryptocurrency dissipated quickly.
However, there may be reason to suspect that Robinhood will successfully sidestep such misfortune when it launches its IPO.
The Robinhood effect
There’s little doubt that Robinhood is playing a key role in putting retail investors in touch with leading cryptocurrencies like Bitcoin and Ethereum – as well as popular meme-based coins like Dogecoin.
Although the platform specialises in the trading of traditional stocks and shares, Robinhood has worked to include cryptocurrencies in its offerings, and intends to add more in the coming months and years.
“We want to make a huge investment and hire a ton of people,” Robinhood CEO Vlad Tenev said in a company video published in early 2021. “We’re going to try and get that done as fast as possible. We might add some new coins along the way.”
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The timing of Robinhood’s intentions has been significant, with unprecedented levels of small-scale Bitcoin investors arriving on crypto markets throughout 2020 and 2021. Holders of 0.01 – 1 BTC (around $40-$40,000) have risen from seven million to almost 8.5 million.
Robinhood average account size versus competitors
| Robinhood | $3,500 |
| E-Trade | $100,000 |
| TD Ameritrade | $110,000 |
| Charles Schwab | $240,000 |
As we can see from the table above, Robinhood has evolved to be the app of choice for investors who like to put their spare change into various assets. With this in mind, it is perhaps unsurprising that Robinhood has seen significant growth in terms of the cryptocurrency transactions that it facilitates.
As Bitcoin reached new highs in early 2021, Robinhood experienced a seismic boost to the volume of new crypto traders entering the market. Despite no month across 2020 welcoming more than 500,000 new cryptocurrency traders, averages for January and February totalled three million.
Robinhood’s combination of both retail and cryptocurrency trading has made the platform ideal for retail investors who are looking to invest their spare money into assets that they like the look of. While Coinbase’s fortunes since going public have been adverse, Robinhood’s versatility and accommodation of all kinds of investors may help the platform to sidestep the hardships experienced by its industry counterpart.
In fact, data shows that Robinhood has outpaced all of its rivals in terms of adoption – even Coinbase with its initial $100bn valuation.
The Robinhood effect has been a profound one for smaller-scale investors and has undoubtedly played a key role in welcoming new participants to the cryptocurrency market. Now, as the company prepares to go public, we may see the money raised help to generate more retail investors on the app and further propel mainstream adoption of crypto.
Assessing Robinhood’s IPO
Unlike Coinbase, Robinhood intends to launch an IPO ahead of its flotation. One of the key factors around the success of Robinhood’s transition into the public markets will come in the form of its valuation.
What we know about Robinhood’s numbers is that the trading app has raised a total of $5.6bn from investors over the course of 24 funding rounds – the most recent round taking place on 1 February and raising a total of $2.4bn. After this funding round, Robinhood attained a value of $40bn, marking a leap of almost $30bn over its September 2020 valuation at $11.7bn.
Robinhood’s IPO has been long anticipated, and online brokerages have been swift to accommodate the listing. IPOs are historically offered up to institutional investors prior to companies going public.
Maxim Manturov, head of investment research at Freedom Finance Europe explains that the playing field between retail and institutional investors is far from level. “It is the latter who usually get the far greater share of an IPO: historically, institutional investors get around 90% of all shares, with only around 10% left for retail trades,” explained Manturov.
“This is where allocation comes from: when the demand is high, the broker will have to reduce order amounts so as to at least partially fill all of them. The allocation ratio, meanwhile, depends on the investor trading activity and volume.”
However, Robinhood prides itself on making trading accessible to all investors, regardless of portfolio size. It’s with this in mind that the platform has taken perhaps its boldest step ahead of going public in launching IPO Access, a feature that enables retail investors to buy into IPOs without any minimum account balance as a requirement.
Although Coinbase has struggled to realise its ambitions on the public markets, it is clear that Robinhood has big ambitions in accommodating more newcomers to the world of investing. It is these ambitions that may ultimately pave the way for greater Bitcoin adoption.
Dmytro Spilka is founder of Solvid and Pridicto