Robinhood warns low trading crypto activity could cause a huge revenue drop in the third quarter of the year as we can see in today’s cryptocurrency news.
Robinhood’s IPO valuation could be questioned as a result of the drop in the crypto trading volume on the platform and in its public filing prospectus with the US SEC, the stock trading platform Robinhood revealed that it is expecting revenue to drop in the third quarter of this year as a result of the low crypto trading volume on the market. With Robinhood going public, the trading app revealed in an SEC filing that a decrease in retail trading activity will result in the company recording low revenue in the third quarter compared to the revenue generated in the second one.
Robinhood warns low trading volume would be the reason as it reported a surge in trading activity in January and February which later returned to levels in line before periods in the past few weeks of the quarter ended Juen 30 and remained there at similar levels into the earlier part of the third quarter. The filing noted that 17% of its transaction-based revenue came from the crypto transactions that marked a leap from 4% recorded in Q4 2020. more than 9.5 million customers traded $88 billion worth of crypto on Robinhood in the first quarter and the company held $12 billion in crypto assets under custody as of March. The market enjoyed a sustained parabolic advance from late 2020 until May 2021 with the token prices dropping by more than 50% since then. An excerpt from the filing 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.”
In the meantime, Robinhood is targeting a market valuation of $35 billion for the upcoming IPO and the stock trading platform hopes to sell 55 million shares of its Class Ac common stock at a price of $38 per share with the goal of raising $2.3 billion. Robinhood has come under severe regulatory scrutiny after the GameStop saga. The US Securities and Exchange Commission questioned his company about the crypto activities that cause a delay in Robinhood’s IPO plans. In June, the Financial Industry Regulatory Authority fined Robinhood $70 million and as per the regulator, the trading platform caused harm to plenty of customers.