- Buying Robinhood shares offers a way to gain exposure to cryptocurrencies through the stock market.
- Robinhood’s crypto ambitions are bigger than most people realize.
Popular stock and cryptocurrency buying app Robinhood will offer the shares of a new company on Thursday, yours. company is conducting an initial public offering (IPO), which means that anyone can invest in its shares.
move is significant not only because Robinhood has become an iconic financial brand, especially among millennials, but because it has also become a major player in the world of cryptocurrencies. Owning Robinhood shares represents a new way to gain exposure to cryptocurrencies through the stock market, as does owning shares in its competitor Coinbase (the first publicly traded pure cryptocurrency company) or Square.
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If you are considering investing in Robinhood, here are five useful things to know. And as they say, this is not investment advice.
1. Robinhood has reserved up to 35% of the shares of the IPO for its clients.
This is a big problem since, in the normal course of things, only bankers and large investment firms obtain rights to the shares of a company before it goes public. It means that retail investors will have the opportunity to share in the price “pop” that often (but not always!) Occurs on the first day stocks hit the public markets.
But not everyone who wants to reserve shares will necessarily get them. Robinhood allows any customer to submit a purchase request through the “Access to Initial Public Offering” feature in their app and will then distribute the opportunity via a draw on Thursday morning. company will distribute up to 18.6 million shares in this way.
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2. list price will be between $ 38 and $ 42.
Robinhood will reveal the official price for its shares, which will trade under the Hood symbol, on Wednesday night, but the price should be in that range.
shares will start trading on the open market on Thursday, probably around noon, and anyone will be able to buy them through the Robinhood app or other brokerage platforms like Fidelity or Charles Schwab. However, once they start trading, the price could go anywhere and those who bought the reserved shares could make a quick profit or suffer a loss.
3. Robinhood’s crypto ambitions are bigger than most people realize
Right now, Robinhood’s cryptocurrency offerings consist of allowing clients to buy and sell a handful of cryptocurrencies, such as Bitcoin, Ethereum, and Dogecoin. In that sense, it is not much different from PayPal or Square’s CashApp, which offer cryptocurrencies but only in a very limited capacity. You can buy and sell Bitcoin, for example, on these platforms, but you cannot transfer it to an external wallet or other exchange.
But by all indications, Robinhood plans to build its crypto platform to be more like Coinbase, where customers can use their wallet, dabble in decentralized finance, and so on. company already has a dedicated crypto unit run by an influential young executive, Christine Brown, who said she has high ambitions for the platform.
company has around 19 million active accounts, and Robinhood could encourage many of these customers to buy cryptocurrencies for the first time. Meanwhile, cryptocurrencies are already an important part of Robinhood’s business. In the first quarter of this year, 17% of its total revenue came from cryptocurrencies and 6% only from Dogecoin.
4. Robinhood could be a risky investment
Investing in Robinhood early could pay off in the long run, especially if the company achieves its goals of becoming Charles Schwab to millennials and selling all kinds of financial products to them.
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But there is no guarantee that it will work this way. Robinhood has a history of technical crises (one through May) and customer service issues that could lead customers to turn to the competition. company also continues to struggle with regulators, while some in Congress are struggling with a key part of its business caral known as the pay-per-order flow.
Order flow payment is a process in which Robinhood sends batches of customer orders to market giants like Citadel Securities and receives a financial bribe in return. Critics say this is misleading, but many securities experts say the practice benefits clients by allowing them to obtain shares at a lower price.
And as the company bets more on cryptocurrencies, its share price will be more exposed to declines in the always volatile cryptocurrency market. Robinhood acknowledged this, warning that cryptocurrency revenue will decline by the end of the year and emphasizing its reliance on Doge in particular. bottom line is that the prices of stocks, like cryptocurrencies, can plummet, and this could happen at Robinhood.
5. Robinhood has already made a profit
While buying Robinhood shares carries great risk, as noted above, potential investors can be encouraged that it has proven capable of making money, making a carast profit in 2020.
This is significant given that many of the hottest companies in recent years, such as Uber or DoorDash, were losing a lot of money at the time of their initial public offering and continued to lose even more money, hurting their share price and leaving to investors with a bad taste in their mouths. This is not the case with Robinhood as it has already shown that it can make money. But the company will face pressure to show that it can continue to do so in the future.
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views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.