Prospectus Summary
This summary highlights information appearing elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing at the end of this prospectus, before making any investment decision. Our fiscal year ends on December 31. Unless the context otherwise requires, we use the terms “Robinhood,” the “Company,” “we,” “us” and “our” in this prospectus to refer to Robinhood Markets, Inc. and our consolidated subsidiaries, and we use the term “RHM” to refer only to Robinhood Markets, Inc. (and not its subsidiaries). We refer to our “users” and our “customers” interchangeably throughout this prospectus to refer to individuals who hold accounts on our platform. However, because we do not have contracts as defined in ASC 606, Revenue from Contracts with Customers, with our users, our users do not meet the definition of “customer” for purposes of the accounting rules. See “—Revenue Recognition” in Note 1 to our audited consolidated financial statements appearing at the end of this prospectus.
Overview
Our mission is to democratize finance for all.
Robinhood was founded on the belief that everyone should be welcome to participate in our financial system. We are creating a modern financial services platform for everyone, regardless of their wealth, income or background.
The stock market is widely recognized as one of the greatest wealth creators of the last century. But systemic barriers to investing, like expensive commissions, minimum balance requirements and complicated, jargon-filled paperwork, have dissuaded millions of people from feeling welcome or able to participate.
Robinhood has set out to change this. We use technology to deliver a new way for people to interact with the financial system. We believe investing should be familiar and welcoming, with a simple design and an intuitive interface, so that customers are empowered to achieve their goals. We started with a revolutionary, bold brand and design, and the Robinhood app now makes investing approachable for millions.
Cultural Impact. We pioneered commission-free stock trading with no account minimums, which the rest of the industry emulated, and we have continued to build relationships with our customers by introducing new products that further expand access to the financial system. We believe we have made investing culturally relevant and understandable, and that our platform is enabling our customers to become long-term investors and take greater control of their finances. Over half of 18-44 year olds in the United States know who Robinhood is according to an internal brand study that we conducted in March 2021. As a further sign of our relevance today, Robinhood reached the number-one spot on the Apple App Store multiple times in the first quarter of 2021 and was frequently ranked number one in the Finance category on the Apple App store during 2020 and the first quarter of 2021.
Built for People. Customer feedback is at the heart of product development at Robinhood. In the early days, our founders would walk the campus of Stanford sharing product and design ideas and gathering real-time feedback. Today, we continue this tradition in a programmatic way, seeking customer perspectives to inform our priorities and inspire our innovation. We want to understand our customers and their expectations, ambitions, fears and challenges. Their insights help us focus on what is important and this approach enables us to expand our offering centered on their needs. Many of our customers are new to investing, and we are encouraged to see them taking their first steps toward wealth creation. We have replaced confusing jargon with simplicity and slang. Our tools are delightful and engaging.
As of March 31, 2021, we had 18.0 million Net Cumulative Funded Accounts on our platform, and from January 1, 2015 to March 31, 2021, over half of the customers funding accounts on our platform told us that Robinhood was their first brokerage account. We believe that close to 50% of all new retail funded accounts opened in the United States from 2016 to 2021 were new accounts created on Robinhood, based on new account data from publicly reporting peer brokerages. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Metrics” for a definition of “Net Cumulative Funded Accounts.”
Technological Innovation. We have built a foundation for future development. With a focused team and appropriate regulatory approvals, we created our own clearing platform. Our platform is entirely cloud-based and built on proprietary, API-driven services to meet the needs of a fast-growing, mobile-first, modern financial institution. Our platform also enables a vertically integrated, end-to-end approach to product development, which helps us move faster from idea to creation, empowers us to better scale with the growth of our business and affords us better unit economics that we can share with our customers. Our approach also provides increased internal visibility over clearing and settlement. We anticipate that our self-clearing platform will continue to position us well to further innovate for customers.
Engagement through Education. Education is core to accomplishing our mission. We believe access to easy-to-understand investment information and education is fundamental to expanding participation in the U.S. financial system. This is why we have created educational content for everyone, no matter where they are on their investing journey. That means jargon-free financial literacy resources and digestible financial news direct to customers. As of March 31, 2021, our Robinhood Snacks newsletter and podcast had nearly 32 million subscribers, and the daily podcast was downloaded nearly 40 million times in 2020, with more than 10 million additional downloads in the three months ended March 31, 2021. Our library of financial literacy resources, Robinhood Learn, had more than seven million cumulative page views as of March 31, 2021, and monthly unique visits to Robinhood Learn rose nearly six-fold from January 2020 to March 2021.
The Robinhood Platform. Our platform, which began as a U.S. stock-focused retail brokerage, currently offers:
•trading in U.S. listed stocks and Exchange Traded Funds (“ETFs”), as well as related options and American Depositary Receipts (“ADRs”);
•cryptocurrency trading through our subsidiary, Robinhood Crypto, LLC (“RHC”);
•fractional trading, which enables all of our customers—regardless of budget—to build a diversified portfolio and access stocks previously out of reach;
•recurring investments, which help customers make investing routine and employ dollar-cost averaging;
•Cash Management, which includes Robinhood-branded debit cards and enables customers to save and spend by paying bills, writing checks, earning interest, withdrawing funds via ATMs and receiving Federal Deposit Insurance Corporation (“FDIC”) pass-through insurance on cash swept from their brokerage account; and •Robinhood Gold, our monthly paid subscription service that provides customers with premium features, such as enhanced instant access to deposits, professional research, Nasdaq Level II market data and, upon approval, access to margin investing.
Financial Tool to Financial Network. We have seen an enthusiastic response from customers and are humbled by how often they share Robinhood with their families, friends and colleagues. This powerful word-of-mouth referral network has helped to rapidly grow our customer base. In 2020, our Net Cumulative Funded Accounts grew 143% to 12.5 million, increasing to 18.0 million as of March 31, 2021, with over 80% of new Funded Accounts in 2020 and in the three months ended March 31, 2021 joining our platform organically or through the Robinhood Referral Program. For the monthly cohorts in the year ended December 31, 2019, our average revenue payback period was approximately 13 months, and for the monthly cohorts in the year ended December 31, 2020, our average revenue payback period improved to less than five months. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Metrics” for definitions of “Funded Accounts” and “revenue payback period.” For a definition of “organically” acquired customers and a definition and description of the “Robinhood Referral Program,” see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Business Model—New Customer Growth.”
For the year ended December 31, 2020, as compared to the year ended December 31, 2019:
•our total revenue grew 245% to $959 million, up from $278 million;
•we recorded net income of $7 million, compared to a net loss of $107 million; and •our Adjusted EBITDA was $155 million, compared to negative $74 million.
In addition, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020:
•our total revenue grew 309% to $522 million, up from $128 million;
•we recorded net loss of $1.4 billion, which included a $1.5 billion fair value adjustment to our convertible notes and warrant liability, compared to a net loss of $53 million; and •our Adjusted EBITDA was $115 million, compared to negative $47 million.
Adjusted EBITDA is a non-GAAP financial measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for more information about Adjusted EBITDA, including the definition and limitations of such measure, and a reconciliation of net income (loss) to Adjusted EBITDA.
Future Vision. Our vision is for Robinhood to become the most trusted, lowest-cost, and most culturally relevant money app worldwide. We innovate at the epicenter of finance, technology and access for all. As we look to the future, we want to help Robinhood customers manage all aspects of their financial lives in one place. We envision them moving seamlessly between investing, saving and spending all on the Robinhood platform. When we check our email, there is a go-to app. When we need a map, there is a go-to app. We envision a world in which Robinhood is that go-to app for money. We believe people want to build financial independence and have the tools and ability to own their financial well-being. We look forward to being our customers' single money app that enables them to achieve those goals.
Trends in Our Favor
Technology Is Transforming Customer Expectations
Across industries, we have witnessed a movement toward products and brands that redefine the customer experience through technology. Today, people can get dinner delivered to their door with two taps on a smartphone, purchase groceries without ever setting foot in a store and conduct morning meetings with hundreds of colleagues from their homes. We observe a similar trend in the equity markets, where 30% of retail investors in the United States place orders using a mobile app, according to 2018 FINRA surveys. That number grows to 59% when looking solely at participants aged 18-34. Innovative technology-based companies are challenging traditional norms and engaging people in new ways.
The nature of these experiences has rapidly advanced customer expectations and demands for intuitive, engaging and easy-to-use products. Brands that empower customers through these types of products are often propelled to cultural relevance. According to PwC, 73% of consumers worldwide point to customer experience as an important factor in their purchasing decisions, and 65% of U.S. consumers find a positive experience with a brand to be more influential than great advertising.
At the same time, smartphone usage has skyrocketed. Not only are smartphones essentially ubiquitous nationwide, they are a dominating force in consumers’ lives. Companies that have been able to leverage mobile technology to deliver market-leading customer experiences continue to reshape legacy industry growth trends and create significant shareholder value.
Increasing Participation in the Financial Markets and the Rise of FinTech Companies
The U.S. stock market is one of the greatest sources of wealth creation in the world. Average historical returns on the S&P 500 amount to approximately 9% annually over the past 50 years. But this great wealth creator has remained out of reach for many individuals and families, while others have had better access, more useful tools and a clearer invitation to participate. That is beginning to change as more and more people are taking their financial lives into their own hands. There are many people still unserved, and we believe we are well-placed to help build this momentum toward increased participation.
Since 2010, the S&P 500 has produced an average annual return of approximately 13%. That has coincided with a substantial increase in participation among retail investors seeking to improve their financial health. Retail investing now comprises roughly 20% of U.S. equity trading volume, doubling in the decade from 2010 to 2020. Yet, we believe there is still significant room for growth: according to a 2019 Pew Research survey, approximately 60% of all Americans still do not have investments outside of their retirement accounts, and, according to a 2020 Gallup poll, an even greater percentage of young adults aged 18 to 29—68%—have no money invested in the stock market at all.
FinTech companies offer customer experiences powered by modern and nimble infrastructure as well as intuitive customer interfaces, making these companies well-positioned to rapidly build and deploy innovative products that meet the expectations of the growing generation of digital consumers. This rapid product cycle has led to innovation across the FinTech landscape, with consumers increasingly looking to technology companies for financial products. Nearly two-thirds of Americans, according to a Harris Poll conducted in 2020, would consider purchasing or applying for financial products through a technology company’s platform instead of a traditional financial services provider, and that figure increases to 81% for Americans aged 18 to 34.
Our Opportunity
Financial services underpin our daily lives. Activities such as investing, saving and spending are core financial activities that offer avenues for Robinhood to grow with our customers throughout their financial journey.
Our current retail brokerage, cryptocurrency trading and Cash Management offerings are the first step toward a comprehensive financial services platform.
•Our retail investing platform is currently our core product offering, one we have continued to expand since its launch in 2015. Retail investing in the United States represents a large market today—U.S. retail investors are estimated by Charles Schwab to have total assets of approximately $50 trillion. Additionally, from January 1, 2015 to March 31, 2021, over half of the customers funding accounts on our platform told us that Robinhood was their first brokerage account. Given that dynamic, we believe we are meaningfully expanding the size of the defined market—bringing in participants who would otherwise not be involved in the financial system. Expanding the universe of investors has been, and we expect will continue to be, a significant driver of our market-leading growth.
•Our cryptocurrency trading platform offers commission-free buying and selling of cryptocurrency through our subsidiary, RHC. From February 21, 2018, the day before we introduced cryptocurrency trading on our platform, to March 31, 2021, the total cryptocurrency market capitalization has grown from approximately $450 billion to approximately $1.9 trillion, driven by increased adoption of cryptocurrency trading by both retail and institutional investors, as well as continued growth of various non-investing use cases for crypto-assets. In addition, the worldwide daily average market volume of Bitcoin, which was the most traded cryptocurrency on our platform by notional value for the year ended December 31, 2020 and for the three months ended March 31, 2021, was over $54 billion in March 2021, as compared to approximately $8 billion in February 2018. While future market size estimates for the cryptocurrency market are highly varied, the historical trend has been strongly supportive. We believe that growing interest and adoption of cryptocurrency will drive increased customer interest in our platform and that we have significant room to grow even within our current customer base. For more information about our AUC represented by cryptocurrency and the percentage of transaction revenue represented by cryptocurrency, please see “—Key Performance Metrics” and "—Key Components of our Results of Operations” under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
•Our Cash Management product, which places uninvested customer cash with FDIC-insured banks and offers a competitive interest rate (and also includes Robinhood-branded debit cards), is highly complementary to our brokerage offering and enhances our overall ecosystem. While still a small proportion of our overall revenue, we believe continued adoption of our Cash Management product by existing customers, as well as increased adoption through the expansion of our customer base, will result in meaningful opportunities in the future. According to the FDIC, there are over $1 trillion in brokered deposits in the U.S. banking system as of June 30, 2020 and the Nilson Report estimated U.S. prepaid and debit card purchase volume to be approximately $3.8 trillion dollars in 2020.
We believe these current product offerings represent only the beginning. Our customers already trust us with their hard-earned cash and assets, positioning us as the first financial services relationship for many new investors and younger generations of investors. We see a significant opportunity to introduce innovative products to address our customers’ future needs—including investing, saving, spending and borrowing—allowing us to grow with new and existing customers from our single money app. These additional opportunities are significant—for example, U.S. credit card purchase volume was approximately $3.6 trillion in 2020 (according to Nilson Report), and there is an approximately $4 trillion volume opportunity in peer-to-peer and micro-merchant payments (according to Square, Inc.). We also plan to invest in improvements to our customer support functions to adequately support the significant growth in our user base. In particular, while we do not currently provide general customer support by telephone and only offer callback phone support (which customers can request in-app) for certain use cases, which may limit potential or existing customers’ access to support and has drawn negative public attention, we plan to expand our phone-based voice support to additional use cases and are increasing the number of customer support professionals we employ.
We currently only operate our business in the United States and offer services only to U.S. citizens and permanent residents with a legal address within the United States or Puerto Rico. Total global wealth outside of the United States, as of mid-2019, has been estimated at over $250 trillion, according to the Credit Suisse Research Institute. Opportunities like this give us confidence that we can have a meaningful impact at driving increased access and market participation outside of the United States, and that the global opportunity for us to democratize finance for all is significant.
What Sets Us Apart
We have built a market-leading financial technology platform with an intuitive customer interface that has changed the landscape of retail investing. While we have already achieved significant growth, we believe we are well-positioned to serve an increasing portion of the population and the broader financial services ecosystem.
Creative Product Design
We believe archaic, cumbersome digital platforms reinforce legacy barriers to participation in the financial system. We put design at the center of our product with the goal of building long-term relationships with customers. We involve our talented product designers early and often throughout our product development process to create intuitive and elegant experiences that efficiently address our customers’ needs. Our customer-centric approach has made our platform easy to use, informative and familiar in look and feel for a generation of mobile-first customers. For example, to make our customer experience both delightful and informative, we seamlessly integrate information into our platform through Robinhood Learn and our newsfeed, which offers free news from trusted sources including Barron’s, Reuters and The Wall Street Journal.
Our products are designed mobile-first, allowing us to offer attractive investing, spending and saving experiences as more people shift their daily financial services activities to the palm of their hands. This simplicity and ease of use has made Robinhood the go-to mobile investing experience, and in 2020 we garnered over half of all new app downloads among mobile investing and trading platforms in the United States (a group comprised of us, Etrade, Fidelity Investments, IBKR, M1 Finance, Schwab, TD Ameritrade, Thinkorswim, Vanguard and Webull) according to mobile data and analytics provider App Annie.
Category-Defining Brand
We believe Robinhood today is a symbol of retail investing and finance in America. By taking a fresh, people-centric approach and creating a delightful, engaging customer experience, we believe we have built a trusted, category-defining brand that has made investing socially relevant for the next generation.
The relationship we have built with our customers has led many to want to talk about Robinhood and share their experience with their friends and family. From Robinhood’s inception, a vast majority of our growth has come directly from customers joining our platform organically or through the Robinhood Referral Program. This virality of Robinhood has continued—and even accelerated—since other major brokerages adopted our commission-free model beginning in October 2019. In 2020 and in the three months ended March 31, 2021, over 80% of new Funded Accounts joined our platform organically or through the Robinhood Referral Program. The excitement around Robinhood demonstrates how our innovative approach to financial products has built deep, loyal customer relationships and positioned us well to continue attracting new people to our platform, and sharing new product experiences with our customers.
Financial Services at Internet Scale
Our people-centric approach has driven customer enthusiasm and engagement, resulting in rapid adoption of our products. We designed our platform to provide our customers with relevant, accessible information when they need it most. Being an investor involves following a regular cycle of events—news releases, earnings announcements, transaction executions—that creates a regular cadence of content and information.