Robinhood Says Low Crypto Trading Activity Could Cause Revenue Decline in Q3 2021

In its amended initial public filing (IPO) prospectus with the U.S. Securities and Exchange Commission (SEC), Popular stock trading platform Robinhood revealed that it is expecting its revenue to drop in Q3 2021 as a result of the cool-off in the trading activity of the cryptocurrency market. 

Robinhood Expecting Drop in Revenue

With Robinhood planning to go public this July, the trading app revealed in a revised SEC filing that a decrease in retail trading activity could result in the company recording low revenue in Q3 2021 compared to revenue generated in the second quarter. 

According to Robinhood, the company experienced a surge in trading activity in January and February 2021, which later returned “to levels more in line with prior periods during the last few weeks of the quarter ended June 30, 2021, and remained at similar levels into the early part of the third quarter.”

Also, in Q1 2021, the filing notes that 17% of its transaction-based revenue came from crypto transactions. This was a leap from the 4% recorded in Q4 2020.

Furthermore, more than 9.5 million customers traded $88 billion worth of cryptocurrency on the Robinhood platform in Q1 2021. The company also held $12 billion in cryptocurrency assets under custody as of March 2021. 

The crypto market enjoyed a sustained parabolic advance from late 2020 up until May 2021, with the token prices declining by more than 50% since then.

An excerpt from the amended filing detailing the company’s expectations of a revenue drop reads:

“We expect our revenue for the three months ending September 30, 2021 to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies, during the three months ended June 30, 2021, and expected seasonality.”

IPO to be Valued at $35 Billion

Meanwhile, Robinhood is targeting a market valuation of $35 billion for its upcoming IPO. The stock trading platform is looking to sell 55 million shares of its Class A common stock at a price range of $38 – $42 per share, with the aim of raising $2.3 billion. 

Robinhood has come under severe regulatory scrutiny, particularly after the GameStop saga. In June, the U.S. Securities and Exchange Commission (SEC) questioned the company about its cryptocurrency activities, causing a delay in Robinhood’s IPO plans.

Also, in June, the Financial Industry Regulatory Authority (FINRA) fined Robinhood approximately $70 million. According to the regulator, the trading platform caused harm to millions of its customers.