COMMENT: Robinhood IPO - EVP, Financial Services Publicis Sapient

  • Financial
  • 26.07.2021 05:59 pm

Comment from David Donovan, Executive Vice President, Financial Services, North America at digital transformation consultancy Publicis Sapient:

“I have a Robinhood account, but I would be both cautious and hesitant on Robinhood’s IPO as an investor. Robinhood is operating on a risky business model underpinned by pay-for-order-flow which is banned in other key markets such as Canada, UK, and more. The lion's share of Robinhood’s revenue is driven by pay-for-order-flow, as high as 81% in recent reports, which means the overwhelming majority of Robinhood’s revenue stream could be placed under review at any moment. The recent news that Robinhood have been handed the largest ever FINRA fine - $70million, for weak policies, platform outages, and not performing proper due diligence of risky options trading accounts for consumers who don’t understand the risk of option trading, compounds my cautious stance on its IPO.

Robinhood has seen enormous customer and revenue growth due to the recent market uprise of meme stocks and crypto, which are both volatile markets. When investing, I’m looking for predictability, not unpredictability, especially when considering revenue stream risks. Pricing for Robinhood’s IPO is set between $38-$42 Billion, with a goal of hitting $35 Billion market cap which is very expensive in general for any stock, but even pricier when considering all the factors contributing to its volatility; frankly, that’s a pretty penny for uncertainty.”

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