The controversial trading platform looks to be in a healthy state financially after filing its S-1 last Thursday, but should investors buy?
Ok, so the dust is settling around Robinhood’s S-1 filing, the memes have been made, the analysis is done, and we’re ready to rock on.
But let’s take a quick breather first.
Should I invest in Robinhood?
That’s a loaded question for a company that’s not even public yet, but let’s look at the financial details that it unveiled on Thursday night:
- It manages more than $80 billion for some 18 million users on its platform.
- It generated revenue of $959 million in 2020, up 245% YoY.
- It turned a $7.5 million profit last year, compared to a $106.6 million loss a year prior.
Plus it intends on raising upwards of $100 million when it does eventually go public, whilst reserving 20% to 35% of its IPO shares for its customers.
So that’s the good side of ‘HOOD’, but what about the risks?
Robinhood’s plans come amid its push to give retail investors better access to IPOs, which are usually reserved for wealthier brokerage clients and institutional investors (i.e. hedge funds, endowments, etc.). While it’s great that we lowly peasants can now avail of IPO shares, Robinhood’s IPO is going to be one hectic affair.
The term ‘volatility’ won’t even do it justice.
Robinhood already has a well-reputed knack for causing stock market volatility (GameStop, AMC, etc.), and now, by offering retail investors a chance to buy its own shares, using its own platform, it’s got the makings of a Christopher Nolan-directed movie written all over it.
Here at MyWallSt, we usually advise investors to wait at least two quarters before buying shares of newly public companies. It allows volatility to settle, gives deeper insights into the business, and allows you to do your research. Robinhood might be one that needs a lot of research, starting here.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.