The Weekly DD – Full Robinhood (HOOD) S-1 Analysis and Breakdown


As infamous as Robinhood may be, the company has seen solid growth over the last 6 quarters. This growth, lead by covid lockdowns and the rise of the Gamestop saga most likely sped up the process of the average Joe becoming acclimatized to trading from their pocket.

Although this growth was unexpected, there was another phenomenon that set Robinhood up for the layup. This was the fact that the average retail trader is becoming more and more educated on trading equities, options, and crypt0currencies. What was once a risky thing to do has now become almost standardized in a short period of time. Let’s go through some of the key-stats for the company.

**Business Model**

The full range of what “Robinhood Markets” (RHM) does is structured into 3 subsidiaries: Robinhood Financial (RHF), Robinhood Securities (RHS), and Robinhood Crypt0 (RHC). The combined products offer:

* Trading/brokerage services for US listed stocks and ETFs
* Crypt0 trading through subsidiary, Robinhood Crypt0 LLC
* Fractional trading
* Recurring investments
* Cash management (debit cards, paying bills, writing checks)
* Robinhood gold – Subscription based model for premium features: professional research, level 2 market data, margin investing.


**Key Stats**

Net cumulative funded accounts: 18.0m

Monthly Active Users (MAU): 17.7m

Assets under custody (AUC): $81b

First time investors: >50%

Organic or referred customers: 80%

Robinhood Snacks Newsletter + Podcast: 32 million subscribers




*Comparing FY 2020 to FY 2019*

Revenues from for FY 2020 were 960m versus 277m for FY 2019, 245% increase. Comparing the same time period operating expenses increased 150%.

Net cumulative funded accounts grew 143%

Monthly Active Users grew 172%

Assets Under Custody grew 346%

Average revenue per user grew 66%


*Comparing Q1 2020 to Q1 2019*

For the 3-months ended in Q1 2021 net revenues were 522m versus 127m for Q1 2020, a 300% increase. Comparing the same quarters operating expenses saw a 250% increase.

Net cumulative funded accounts grew 150%

Monthly Active Users grew 106%

Assets Under Custody grew 317%

Average revenue per user grew 65%


*Segmentation of Assets Under Custody*

Equities: 80.3%

Options: 2.48%

Crypt0: 14.32%

Cash: 9.46%

Less – Customer Margin: (6.67%)


**Revenues – Broken Down by Segment (most recent quarter)**

Transaction-based revenues: 81% (payment for order flow (PFOF)* + other)

Net Interest Revenues: 12% (lending activities/margin borrowers)

Other Revenues: 7% (robinhood gold, proxy rebate revenue)


*PFOF makes up 75% of TOTAL REVENUES for Robinhood, broken down by the following market-makers.

Citadel: 34%

Susquehanna International Group & Subsidies: 18%

Wolverine Holdings & Subsidies: 10%

Others: 13%

This 75% of total revenue in 2020 is up from 2019’s PFOF percent of total revenues of 62%


**Operating Expenses – Broken Down**

Brokerage & Transaction: 12%

Technology & Development: 22%

Operations: 14%

Marketing: 19%

SG&A: 31%


**Robinhood’s Current Focus**

* Customer acquisition: significant opportunity in continued customer acquisition/referral program.
* New product offerings to existing customers (growing with the customer)
* Technological innovation: product development, educational content, technology and infrastructure improvements, customer support.
* International expansion (Europe and Asia)


* Approximately 60% of Americans do not invest outside retirement accounts.
* 68% of adults aged 18-29 do not invest at all.
* Estimated that total assets in the investable market that exists for retail investors is approximately 50 trillion (Charles Schwab estimate).
* Robinhood’s cash management service highly complementary service to what they currently offer. They’ve also vertically aligned every aspect of their business model to stay within the Robinhood ecosystem.


* Experienced huge growth 2020/2021, might not be able to maintain growth.
* 2020 they were net profitable, but might not maintain profitability in the future.
* PFOF payment for order flow is dependent on market activity. Any bans on PFOF or regulation moving forward could reduce profitability and expand potential negative publicity.
* Systematic market risk to economic and political conditions.



Notable underwriters of the IPO:

Goldman Sachs

JP Morgan



Wells Fargo


**LockUp Expiration**

According to the table below taken from the S1, 15% of the class A shares will be available for sale in the public market **on the first trading day** after being listed on the Nasdaq.

Another 50% of class A shares will be available for trade on the “tranche I release date”, described in the S-1 as: “during the period beginning on the date of this prospectus and ending 28 days after the effective date of the Form S-1 resale registration statement that we have agreed to file in respect of such shares”

**Final Thoughts**

Robinhood has (obviously) been the beneficiary from not only covid lockdowns and the adoption of the stay-at-home retail trader, but also from the exposure they received during the Gamestop short-squeeze. They are growing incredibly fast on all key stats and metrics that include cumulative funded accounts, monthly active users, and net assets under custody. To put things in perspective in a stellar 2020 they did roughly 1 billion in revenues and so far in Q1 2021 alone they’ve already done 522 million (on pace for 2 billion revenues for fiscal year 2021). Their bottom-line is teetering between net-profitability and net-loss and management has said it is uncertain which side of the coin net revenues will fall on in future quarters (short-term).

Having said that, from the S-1 management also see’s growth continuing with a large share of the market still being un-tapped. Their biggest opportunities lie in the fact that 60% of Americans do not trade outside of their retirement accounts and majority of young-adults aged 18-29 still do not invest at all (the median customer age is 31 years old). Robinhood also has a lot of room to grow in international markets, mainly Europe and Asia.

Going off the data from previous years and looking at how Robinhood scales as they grow. It seems that on average for every $1 in revenue the company grows in scale, operating expenses will increase by approximately 75 cents. The most notable *increase* in expense for Robinhood has been their technological and development expense. This is understandable as the company has been scrutinized for when their services have gone down at seemingly inconvenient times for retail traders.

Lastly, the biggest risk for Robinhood is their PFOF component which constitutes nearly 75% of total revenue. Robinhood’s business model relies on PFOF and any regulation on that segment would put their business at risk.

Positions: None because the stock is not listed yet.

What do you think?

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  1. I don’t see the mention of the recent 75 million dollar fine, the first of presumably a few. Additionally you don’t address the coming crack down on pay for order flow regulations, which would dramatically effect their business model.

    Great work tho!

  2. Robbin’Hood is reserving 35% of their shares for retail and I’m certain they aren’t doing it out of kindness. Citadel didn’t give them a billion buck bailout back in January without expecting something significant in return. I wouldn’t touch this with your wife’s boyfriend’s dick.

  3. People here are in denial if they think Robinhood isn’t going to do well during its IPO. It’s got some downfalls, and a lot of hate. But almost every screenshot (not all) are of Robinhood accounts. And it has name recognition.

When do you guys think crypto payments will become mainstream ?

DOGE. Do. Only. Good. Everyday. RIP TACO