The boom in retail investment had begun to slow, stock trading app Robinhood, which is set to go public next week, has warned of a potential slowdown in trading revenue and new consumers.
“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,” Robinhood said in an amended prospectus released Monday.
The decline is occurring after a period of rapid expansion. The Menlo Park, California-based free-trading pioneer expects sales of $546 million to $574 million in the second quarter of 2021.
This increased from $244 million in the second quarter of 2020, with a 129 percent increase. In the second quarter of 2021, however, the business expects a net loss of $537 million to $487 million, compared to a profitable first quarter in 2020.
Robinhood, which provides equities, cryptocurrency, and options trading as well as cash management accounts, benefits from its customers’ more speculative trading habits. Options trading generates around 38% of revenue, while crypto generates 17% of revenue. In addition, margin and stock lending trading levels have risen in 2021.
Stagnation in options, margin trading, and crypto — with the price of bitcoin around $30,000 — might stifle Robinhood’s development as it prepares for one of the year’s most anticipated public debuts.
Robinhood also said it anticipates the growth rate of new customers “will be lower” in the third quarter of 2021, compared to the second quarter, “due to the exceptionally strong interest in trading, particularly in cryptocurrencies, we experienced in the three months ended June 30, 2021, and seasonality in overall trading activities,” the S1 said (S-1 is an SEC registration required for U.S. companies that want to be listed on a national exchange)
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