Robinhood has been heavily criticized for its use of payment for order flow (PFOF), which accounted for 81% of its 1Q21 revenue. This point applies not only to social media companies, but it also applies to Robinhood. However, Robinhood expects to swing to a net loss of $487 million to $537 million in the second quarter after turning a profit in the same quarter last year.As the saying goes, “If you’re not paying for a product, you are the product.” Revenue jumped 309% in the first quarter to $522 million from $128 million a year prior. In its updated prospectus, Robinhood estimated second quarter revenue of $546 million to $574 million, up from $244 million in the second quarter of 2020. Underwriters will have an option to buy an additional 5.5 million shares. Goldman Sachs and JPMorgan Chase are the lead investment banks on the deal. The company was last valued in the private markets at $11.7 billion in September. That's up from 18 million in the first quarter of 2021, which was an increase of 151% from a year earlier. Robinhood estimates it has 22.5 million funded accounts (those tied to a bank account) as of the second quarter. The app, which offers equity, cryptocurrency and options trading, as well as cash management accounts, experienced record trading levels during the pandemic and amid the meme stock craze of early 2021.
Robinhood has become a central gateway to the markets for young and first-time investors.
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