- Despite a $70 million fine for misleading investors, Robinhood is pushing ahead with its IPO plans.
- In its S-1 filings, the company revealed that its revenue was tied to DOGE’s popularity.
Since the COVID-19 outbreak, Robinhood has recorded astronomical growth. With people stuck at home, there has been a heightened appetite for trading seeing the popularity of platforms such as Robinhood, one of the leading platforms offering commission-free trades of stocks, cryptocurrencies and exchange-traded funds via a mobile app skyrocket. The growth has driven Robinhood to file for an IPO. But according to the financial reports disclosed by the company earlier this week, a lot of its success is tied to Dogecoin. As such, the company has warned that if the meme coins popularity waned, it would hurt its revenues.
In the first quarter, DOGE was one of the most popular cryptocurrencies after some positive mentions by Elon Musk both in public appearances and through social media. In May, the token reached a peak of $0.73. Financial reports from Robinhood reveal that during this time, Dogecoin accounted for 34 percent of its cryptocurrency transaction-based revenue. This is 30 percent more than the previous quarter.
The S-1 filing with the Securities and Exchange Commission highlighted that a substantial portion of the recent revenue growth was attributed to the Dogecoin transactions. Further adding;
If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected,
In recent months, DOGE has lost more than 70 percent of its value from its high. In addition, Elon Musk’s influence on prices has faded in recent weeks.
In total, the company revealed that cryptocurrency transactions accounted for up to 17 percent of Robinhood’s total revenue in the first quarter, or $87.6 million, this was a significant increase from $4.2 million in the previous year.
Robinhood fined $70M for misleading customers
Despite its popularity among retail investors, the platform has come under fire for some irregular operations. In the crypto world, the platform is notorious for halting operations due to technical difficulties during drastic price movements. This has in the past prevented users from selling or buying at critical levels. Although the company always promised to improve the platform to handle the higher volume, little seemed to change.
Earlier in the week, the US’s Financial Industry Regulatory Authority (FINRA) slapped a $70 million fine on the company for “widespread and significant harm” to customers by offering false information. This is the second year in a row where the company has been fined after the Securities and Exchange Commission fined it with a $65 million fine for misleading stock market customers last year.
Such hefty fines and runnings with regulators are likely to further affect the company’s share prices once it’s public.