Deeply funded fintech company Robinhood has been the world’s most discussed startup over the last week. After the discount trading pioneer found itself in the midst of a battle between hedge funds on one side and a slurry of retail and institutional capital on the other, Robinhood’s trading volume spiked last week.
But after the National Securities Clearing Corporation (NSCC) raised its deposit requirements before the market open on Friday, Robinhood was forced to restrict trading in a number of popular stocks. The company also drew down its credit lines and raised new capital from prior investors to stay open during a trading avalanche.
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According to a Clubhouse chat between Robinhood CEO Vlad Tenev and Elon Musk last night, the NSCC initially asked Robinhood to post $3 billion in reserve capital. That figure was reduced to $1.4 billion and later to $700 million after Robinhood agreed to limit certain trades. Robinhood transmitted the funds and opened Friday.
But that’s all recent news. Let’s look back further.
TechCrunch has tracked Robinhood’s payment for order flow (PFOF) revenues for a several quarters now. The key revenue source for Robinhood is trackable, as the company has to file its incomes from it. This provides a good view into the company’s growth.
Today we’re parsing its Q4 2020 data, which shows a return to sequential-quarterly growth at the trading upstart.
Of course, we won’t have Q1 2021 data for another three months, but we do have — at last — a good look at how Robinhood wrapped 2020 and some insight into why its investors were willing to put in another $1 billion just last week.
Regular readers of The Exchange will recall that after a stonking Q2 2020, Robinhood’s Q3 2020 PFOF incomes were large, but not sequentially impressive; while Robinhood likely saw sharp revenue gains from Q3 2019 to Q3 2020, when we stacked last year’s third-quarter against its second, the company’s growth had slowed enough that we were curious what would happen in Q4.
So much for a blowback!