Robinhood confirmed indicators that its once-booming throng of retail investors are cooling to the net brokerage, reporting that its consumer development plateaued and cryptocurrency buying and selling stalled within the final quarter.
Though analysts had predicted a slowdown in buying and selling volumes, the sharp drop in crypto buying and selling was unexpectedly extreme, with transaction revenues from the unstable asset class falling 78 per cent, from $233m within the second quarter to $51m within the third.
The drop-off in crypto buying and selling dragged down Robinhood’s general income per consumer by 42 per cent, serving to ship its shares down as a lot as 10 per cent in after-hours buying and selling, in line with FactSet information. Transaction revenues dropped 41 per cent, from $451m within the second quarter to $267m within the third.
Vlad Tenev, Robinhood chief govt and co-founder, stated the corporate had used the quarter to develop new products like crypto wallets that would function the premise for future development. “We consider that Robinhood is changing into probably the most trusted and intuitive platform for retail and crypto traders,” Tenev stated.
Robinhood went public in July in an providing touted as a part of the meme stock revolution that was democratising finance by bringing thousands and thousands of recent retail traders into the general public markets and cryptocurrencies.
The group estimated that half of all new brokerage accounts opened from 2016 to 2021 have been on its platform, and half of its personal 22.4m funded accounts opened since 2015 have been first-time traders. Monday night’s drop in Robinhood shares took them beneath their IPO value of $38.
Month-to-month lively customers on the platform fell from 21.3m to 18.9m during the last quarter. The brokerage stated the decline in crypto exercise additionally led to “significantly fewer” new accounts, in addition to a drop in whole funded accounts on the platform.
Funded accounts fell from 22.5m to 22.4m and new clients opened simply 660,000 accounts, down from 5m within the second quarter. The dealer additionally cautioned that headwinds will most likely persist into the fourth quarter.
Though summer season months are historically slower for retail dealer sellers, Robinhood’s outcomes underperformed extra conventional gamers comparable to Charles Schwab, in line with Devin Ryan, director of economic expertise analysis at JPMorgan.
Brokerages like Schwab “are nonetheless seeing sturdy metrics of engagement comparable to web new asset development, which stays very wholesome,” Ryan stated.
Robinhood added crypto “wallets” to the platform earlier this month, a transfer that places it in direct competitors with extra established digital foreign money venues comparable to Coinbase.
Regardless of the slowdown, Robinhood has grown quickly over the previous 12 months. Cryptocurrency transaction revenues have been nonetheless up over 800 per cent from the identical quarter final 12 months.
“The corporate had telegraphed the tone of the quarter fairly effectively with second-quarter outcomes,” Ryan stated. “The query is: are we returning to a extra regular degree of exercise after an arguably unsustainable first half of the 12 months?”