Popular stock and crypto trading app Robinhood is planning on going public on the stock exchange with an initial public offering (IPO). Robinhood has been offering zero fee crypto trading since its crypto services launch, causing it to amass users quickly, and now it has over 5 million crypto traders using the platform. If Robinhood were to succeed at getting publicly listed, it would be the first crypto related exchange in the world to have a publicly tradeable stock, a major milestone.
The caveat with Robinhood is it doesn’t offer spot crypto trading. Users can’t withdraw any crypto to their own wallets from Robinhood. Robinhood seems to suggest that the crypto assets in Robinhood accounts are real, but there is no explicit guarantee that Robinhood actually has crypto reserves for all of their crypto balances, they might be using a mix of cash and crypto to back crypto balances. That’s why it is prudent to say this is the first crypto related exchange to get a public stock if successful since Robinhood cannot be considered an actual crypto exchange at this time. That being said, Robinhood’s support page says they want to add crypto withdraws in the future, which would make them a real spot crypto exchange. There is no sign of this happening yet though.
One very important point about this is if Robinhood isn’t backing all of their balances with actual crypto, then they are generating paper crypto. Paper crypto is extremely bad for crypto prices since it takes demand away from spot crypto markets, and therefore crypto prices end up being lower long-term as demand is being diverted into paper crypto which does not impact spot price.
Robinhood has conducted some extremely successful funding rounds leading up to this IPO. In April 2017 Robinhood raised USD 110 million in a series C funding round, giving the company a valuation of USD 1.3 billion. In February 2018 Robinhood conducted a series D funding round and raised USD 363 million, further raising the valuation to USD 5.6 billion. There will likely be at least one more funding round before the IPO, which will force Robinhood’s valuation even higher.
Robinhood has been undergoing constant audits from the United States Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) in preparation for the IPO. Additionally, Robinhood is seeking a Chief Financial Officer (CFO).
If Robinhood’s IPO is successful, and it appears it will be, the billions of USD generated by the IPO will put Robinhood in a position to become a global stock and crypto powerhouse. Robinhood might be considered a small time crypto exchange now, and perhaps not even a real crypto exchange, but that could drastically change after the IPO.
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