Robinhood Markets and three of its executives are selling up to 60.5 million shares of its stock in an initial public offering, with trading expected to begin on the Nasdaq Thursday.
Robinhood doesn't charge trading commissions or require customers to carry big balances - one reason why it's so popular. It makes the bulk of its money - 81% of revenue in the first quarter- by funneling investors' orders to big trading firms, such as Citadel Securities, which take the other side of the trade. They also give a payment to Robinhood.
“I think investors in many ways are pricing that in,” Mitts said, “and there's a pretty good sense that Robinhood is going to be OK.”Even if payment for order flow sticks around, Robinhood's dependence on the practice could be an issue. During normal times, Robinhood may get about 75% of its money from transaction-based revenue, roughly triple what some competitors get, said Tom Mason, senior research analyst at S&P Global Market Intelligence.
Among other risks, Robinhood's customers could spend less time on the app if a fading pandemic means they can go on with their lives and do other things with money.
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