Still, the company’s shareholders stuck with it. Within a week, it raised two rounds of emergency funding totaling $4.4 billion to meet loan requirements for stock trades and to continue executing trades. . That funding left Robinhood with huge losses in the first three months of the year.
Robinhood drew scrutiny from regulators long before GameStop frantically garnered national attention. In 2018, it announced that it would offer checking and savings accounts, claiming it was backed by Securities Investor Protection Corporation, a consumer protection group. monitor brokerage firms. After the group said it didn’t guarantee checking and savings accounts, Robinhood stepped back and started the service a year later.
Last year, Robinhood was fined $65 million by the US Securities and Exchange Commission for misleading customers about how to make money. And in recent months, Massachusetts has escalated its battle against the app, moving to revoke its license in the state, echoing other complaints that its app entices inexperienced investors Risk betting experience.
The company also experienced shutdowns at key times, including last March, when the pandemic broke out and the stock was in free fall.
In its prospectus, Robinhood pointed to regulatory oversight as a risk factor. It said it expected to be subject to future investigations, actions and settlements “given the highly regulated nature of the industries in which we operate.”
Robinhood also highlighted class action lawsuits related to outages, securities fraud, hacks, and trading outages this year. The company settled a lawsuit filed by the family of Alex Kearns, a customer who died by suicide last year after making risky transactions on Robinhood’s app.
“This is a company that is flying super fast in a really regulated environment,” Mr. Haslett said.
Another risk, Robinhood said, is a drop in demand for Dogecoin, a joke cryptocurrency based on a meme about a Shiba Inu dog. The company said that one-third of its revenue from crypto trading in the first three months of the year came from Dogecoin.