Robinhood share value falls below IPO valuation
Robinhood, the platform that was once the raging crypto trading application, marked on Tuesday shares drop below its initial public offering (IPO) valuation after trading hours as revenues fell with key cryptocurrencies, such as Dogecoin.
The trading site is witnessing a change in its winds, as its long trail of investors are holding back their funds from the online brokerage due to a decline in user growth, and cryptocurrency trading halted in its last quarter.
Following the release of its Q3 results, Robinhood’s share price reached $36.10, below the initial offering of $38 from its July IPO.
For experts, the sudden shift in trading volumes did not come as a shocker as the sudden and harsh plunge in crypto trading was undeniably damaging, marking transactions revenues tumbling by 78 percent, fluctuating from $223 million from its second quarter (Q2) to $51 million in its third (Q3).
“For the three months ended September 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenue and considerably fewer new funded accounts than in the prior quarter,” the company said in a statement.
The plaguing descent in crypto trading afflicted Robinhood’s total revenue per user by 42 cents, sending its shares down by almost 10 percent in after-hour trading, while transactions revenue fell by 41 percent, going from $451 million in Q2 to $267 million in Q3, according to FactSet data.
“If this quarter is a hint of what’s to come, in terms of volatility, I would expect sentiment and the valuation multiple to drop,” analyst at FBB Capital Partners, Mike Bailey, informed clients in a note.
“The Robinhood sales miss contrasts with the more favorable trading revenue for the big banks and brokers, which may have led investors to anticipate higher trading volumes for Robinhood,” he added.
The FinTech company’s quarterly net loss of $1.32 billion left its share valued at $2.06 per share. A factor that is massively credited to stock-based employee compensation with the rise of the IPO. During that time, Robinhood welcomed an estimate of 21 percent additional employees in Q2’s fiscal year, mostly in fields specializing in engineering, customer support, and compliance.
In its last quarter, Robinhood’s monthly active users plummeted from 22.5 million users to 22.4 million, with 660,000 new subscribers welcomed on the platform, dropping from 5 million in its Q2.
Earlier this month, the financial servicing company added a digital wallet platform, putting it in explicit competition range with globally renowned cryptocurrency venues, such as Coinbase.
Its cryptocurrency transaction volume, specifically with meme coin Dogecoin, denoted 62 percent of its total trading volume.
Now, even though Robinhood marked a damaging plunge in its Q3, over the last year, the company exponentially grew its transaction revenues maintained a heightened rise from last year’s quarter.