- Robinhood's pending IPO could fetch as much as $30 billion or more, said S&P Global Market Intelligence.
- The analysis was made in part by looking at metrics from IPOs of TD Ameritrade and E-Trade.
- Robinhood still bears a "significant amount of headline and regulatory risk", says S&P Global.
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Robinhood is on course to go public and its IPO could be valued at $30 billion or beyond, with S&P Global Market Intelligence making that assessment in part on valuations from competitors when their respective shares began trading.
Robinhood, whose platforms allow users to trade stocks, ETFs, cryptocurrencies and gold, plans to list on Nasdaq, according to IPO documents filed last week with the Securities and Exchange Commission.
With the filing, "suddenly a rumored $20 billion valuation does not seem out of the question. It might even be a conservative estimate," Tom Mason, a research analyst at S&P Global Market Intelligence focused on the financial tech sector, said in a note published Tuesday. "We think Robinhood will have a strong IPO showing and should be valued at upwards of $20 billion in market capitalization, if not $30 billion."
S&P Global said the last private post-money valuation in January was $18.2 billion. The firm said a $30 billion or more market cap for Robinhood could be possible if it's based on valuations from rivals in the online brokerage space such as Charles Schwab, E-Trade Financial and TD Ameritrade when they were growth stocks upon their trading debuts.
"Based on their ratios of market cap-to-last-12-months revenues in the late 1990s, Robinhood could easily command a $20 billion valuation," wrote Mason. TD Ameritrade's quarterly ratio was the highest of the three brokers, peaking at 26.4 times last 12-months-revenues in the second quarter of 1999. A $35 billion valuation for Robinhood could be possible based on TD Ameritrade's 26.4x ratio and Robinhood's $1.35 billion in total net revenues in the four quarters that ended in March, the report said.
"Of course, those lofty valuations in the late 1990s also preceded the dot-com market crash," wrote Mason.
Robinhood's IPO is highly anticipated in the wake of the company's emergence as a leading platform choice for retail investors, particularly those who have made it their mission to battle hedge funds seeking to make money off the decline in shares of so-called meme stocks such as GameStop and AMC Entertainment.
S&P Global Intelligence pointed to a Quartz article in February that said Robinhood's shares were being valued at $40 billion in private secondary markets.
"That still seems on the high side, based on historical comparisons, but perhaps within the realm of possibility, given Robinhood's rapid growth in users and revenues," said Mason.
Robinhood in its IPO prospectus said monthly active users surged by 6 million in the first three months of this year, to 17.7 million, a jump of 51% from the end of December 2020. The expansion came even as Robinhood users expressed outraged in January at the company's decision to halt buying of shares of GameStop and other meme stocks during a massive rally led by retail investors active on Reddit and other social media sites.
"Robinhood bears a significant amount of headline and regulatory risk, given its missteps at times around disclosures and financial regulations, but it continues to have tremendous growth potential, in our view," Mason wrote. "It has yet to offer lucrative ancillary services like wealth management, as its incumbent competitors do. If it adds more revenue streams, it will be an even more formidable force to be reckoned with."