Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Equity Capital Markets

Robinhood Markets  / Equity Capital Markets

Sheerly looking at Robinhood’s recent financial performance, one might conclude it has embarked on an impressive growth journey and could be a recent success story of Silicon Valley.The payment for order flow generates the majority of its revenue as it sells the clients’ orders to the market makers to fill. As such, Robinhood’s revenue still depends heavily on the users’ trading frequency and volume even though it doesn’t take any commission out of the trades.The company’s rumored IPO valuation of $40 billion represents a significant premium to its peers. It is hard to justify such a premium since it is difficult to gauge Robinhood’s future growth which is largely dependent on its users’ trading frequency and volume in the future.In addition to the company’s over-reliance on the payment for order flow and its potentially rich valuation, there are also significant regulatory concerns. The downside risk is simply too high and outweighs any growth potential the company could still have in the long run.

Sheerly looking at Robinhood’s recent financial performance, one might conclude it has embarked on an impressive growth journey and could be a recent success story of Silicon Valley.The payment for order flow generates the majority of its revenue as it sells the clients’ orders to the market makers to fill. As such, Robinhood’s revenue still depends heavily on the users’ trading frequency and volume even though it doesn’t take any commission out of the trades.The company’s rumored IPO valuation of $40 billion represents a significant premium to its peers. It is hard to justify such a premium since it is difficult to gauge Robinhood’s future growth which is largely dependent on its users’ trading frequency and volume in the future.In addition to the company’s over-reliance on the payment for order flow and its potentially rich valuation, there are also significant regulatory concerns. The downside risk is simply too high and outweighs any growth potential the company could still have in the long run.

Robinhood IPO: Downside Risk Could Outweigh Any Potential Future Upside

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Headline Developments: Another week, another major cyber attack!  Last Friday, a global ransomware attack hit up to 1,500 companies in what is believed to be the biggest supply chain attack to date.  In the attack, American software company Kaseya was compromised, opening a door for hackers to spread ransomware to managed service providers that use it’s technology, and in turn their clients.

Headline Developments: Another week, another major cyber attack!  Last Friday, a global ransomware attack hit up to 1,500 companies in what is believed to be the biggest supply chain attack to date.  In the attack, American software company Kaseya was compromised, opening a door for hackers to spread ransomware to managed service providers that use it’s technology, and in turn their clients.

United States

Robinhood Markets, Inc. operates a financial services platform. The Company offers brokerage and cash management applications such as stocks, exchange-traded funds, options, and cryptocurrency. Robinhood Markets serves clients in the United States.

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Robinhood Markets (HOOD US)

Robinhood IPO: Downside Risk Could Outweigh Any Potential Future Upside

Although Robinhood had an impressive growth in recent years, the downside risk, in relation to its over-reliance on PFOF and the regulatory...

Alec Tseung

Weekly Innovation Review (WIRE) #39

Headline Developments: Another week, another major cyber attack! Last Friday, a global ransomware attack hit up to 1,500 companies

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