Robinhood IPO Filing Shows Power of the Meme-Stock Boom

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Robinhood Markets Inc. unveiled striking growth figures Thursday in the paperwork for its long-awaited initial public offering—and a long list of growing pains.

The stock-trading app counted 18 million users with funded accounts at the end of March, more than double a year earlier. Revenue in the first quarter of 2021 more than quadrupled to $522 million. The daily average number of cryptocurrency trades on Robinhood expanded by a factor of 14, and net value of cryptocurrencies held in Robinhood users’ accounts rose to $11.6 billion from $481 million.

Meanwhile, users transferred their assets out of Robinhood at nearly 10 times the average rate after it curbed trading in GameStop Corp. and other high-flying stocks in January, a decision that also resulted in about 50 class-action lawsuits. Around 81% of its first-quarter revenue stemmed from a practice criticized by the chair of the Securities and Exchange Commission. And the company is facing a raft of investigations, with federal prosecutors going so far as to execute a search warrant to seize the cellphone of Chief Executive Vlad Tenev.

Robinhood, which plans to list on Nasdaq under the ticker HOOD, is set to be the buzziest company to tap the U.S. IPO market this summer, especially since up to 35% of its offering is being allocated to its own trading customers. The listing could value the stock-trading app at $40 billion or more, The Wall Street Journal previously reported.

But the company will have to answer for a long list of risk factors and missteps when making its pitch to potential investors. It will also have to convince them that the company can keep growing in the absence of the pandemic stay-at-home orders, government stimulus checks and social-media buzz that fueled its popularity.