Robinhood Financials EXPOSED!!! HOLY CRAP [Robinhood IPO]

hey everyone me kevin here okay i

we just got done with the valuetainment

podcast and i was going to go change the

pricing for the courses with that 40

percent of google code

that's expiring yesterday i was gonna

change the pricing and now the robinhood

ipo comes out and i'm like oh my gosh

i gotta get back somewhere i can record

so we're in the valuetainment studio

they're kind enough to let me film in

here and we gotta go through some first

impressions on these numbers

oh oh my gosh oh my gosh like wow the

robin hood numbers are out

let's do first impressions on the robin

hood numbers so i'm gonna have to just

speak some of these numbers here because

i can't get them up on screen so the

first thing that struck me like

right away i'm like oh my gosh net loss

for robin hood in the first quarter was

1.433

billion dollars actually one point four

four billion dollars like what happened

what happened that's absolutely horrible

for robin hood

what happened we got to digest this and

so i kept going through the report

and here's what i'm taking away here's

what i'm learning here's what i've got

highlighted

transaction based revenue folks they're

making 420 million dollars

or made 420 million dollars in just the

first quarter that's

almost double the last three months of

last year

their transaction revenue skyrocketed

this fourth quarter now we don't expect

that to continue

we do expect there to be some sort of

slowdown in momentum trading and volume

that's going to mean less revenues as

well but we're gonna get into the weeds

in terms of

where they're making their money how

involved is citadel we've got lots to

talk about here

uh net interest revenue so imagine this

would be on stock lending probably and

also on margin

62 million so really a fraction i mean

that's like 13 14

of their transaction based revenue other

revenues i imagine this is uh this is

these are things like robin hood gold i

haven't read through the whole s1 yet

i'm probably

i mean i've spent about 30 minutes on it

right now and we're doing this video to

talk about some initial first

impressions here so a lot of weeds to go

through here

but we've got 39 million dollars there

uh so that's less than 10

of the transaction revenue going to this

their expenses

in the first quarter absolutely exploded

in terms of marketing their marketing

expense

literally 3xed their marketing expenses

in the quarter went from 33 million

to 102 million dollars now that's

probably because

they started paying they started doing

affiliate partnerships with a lot of

creators right before the massive

gamestop crisis

and that was one of the reasons they

ended up with net more users

during the gamestop crisis which ended

up being perfect for them because they

were able to tell everyone in the media

hey look

we ended up getting more users despite

the gamestop crisis yeah but that's

because between january 22nd and

february 1st

you were doing a sign up and get four

free stocks with this creator link and

then paying affiliate commissions

much more than you had ever done before

with the sign up and get a free stock

thing or whatever with robinhood

the new affiliate structure is huge and

it cost them a pretty freaking penny in

that first quarter

102 million dollars that's a lot because

they doubled their transaction growth

uh which i mean hopefully that marketing

revenue long tails right i don't think

they're spending that kind of money

anymore i think they realize they

overspent so this is probably a little

bit more of a one-time thing

just because they haven't really talked

about bringing the affiliate thing back

doing the

like the crypto things the smaller

commissions and things but i think they

realized they overspent on

creator affiliate commissions it was

insane technology development they spent

116 million dollars that's up from 81

million uh 900

000 in the last quarter and up from 44

million i'm sorry 55 million in the

quarter before

ending september 30th 2020. so they're

spending a lot more on technology

spending more on operations about 50

more in operations 50

more on technology uh only about 30

more on the actual brokerage and

transaction side but

uh the big expense actually comes from

and this is this helps us understand

this a little bit

change in value in convertible notes and

warrant liabilities

now that's going to take a lot more

weeding through to go through but there

were some recent sec rule changes where

you have to

recognize warrants now and this was a

big issue with spax

you have to recognize warrants as an

expense

even though like you're getting cash

from selling warrants

you have to recognize it as an expense

the same thing's happening at sofi

you look at their general and admin it's

like way through the roof

and in the weeds of their s1 is that 83

or 87 million dollars of that is because

of warrants well you've got the same

kind of warrant crisis going on here

except it's for 1.49 billion

dollars literally if you walked back the

1.49

billion dollars this company would

be profitable it's insane to say but

this company would be at around

50 to 60 million dollars in profit i'm

doing rough rough numbers right now

because

again i can't share the screen there's

limited i could do here i

i can only do this on one take as well

so you're getting me pretty raw here

so right now they recognized a six

dollar and twenty cent loss

per share in the first quarter but again

most of that worn liabilities they'd be

profitable

if it weren't for these warrant

liabilities in fact if they were

somewhere around

60 million dollars of revenue in the

first quarter without these warrant

liabilities

you would take that 60 million divided

by 230 million diluted shares

puts you somewhere around 26 cents

in quarterly revenue that's about a buck

you'd be at about a dollar

in annualized eps if you could

extrapolate out because their marketing

expenses are going to go down their

transaction revenues are going to go

down a bit

they're probably at an annualized 2021

one dollar eps when you take out

the warrant liabilities that's actually

really good because i

expect robinhood to probably sell for

ipo somewhere between evaluation private

market revaluation right now is like 60

65 70 per share i wouldn't be surprised

if they're somewhere closer to

uh an 80 90 per share which would put

them very high

on 2021 valuation be like 80 90 times

but if you extrapolate it out to 2022

3 4 you know future pe would actually be

lower they're they're making a decent

amount of revenue a very decent amount

of revenue it's not bad at all right now

we've got uh robin hood uh primary

sources of liquidity

looks like a lot of they raised a lot of

warrants and and notes during the uh gme

crisis

uh that they're gonna have to go through

the weeds on this i want to

explore now uh here we go this is

interesting okay so this here

says how they're making most of their

money folks this is mind-blowing okay

ready

for this options 197

million dollars in the first quarter of

2021 that's about that's

almost half of their revenue was coming

from options trading

and finra just smacked them upside the

head because of misleading statements

regarding options

now i did a whole breakdown video on

finra and these options

but oh i cannot believe i mean you this

is probably about 45 percent is going

anyways from options

only 133 million out of 420 i have 420

uh it actually is 420 million total

transaction based revenue is 420 million

it's perfect but anyway equities is only

130.

so that's uh that's less than half right

i mean you're somewhere in like 30

or something like that uh almost half

options maybe somewhere around 30

for equities crypto currencies even

this is okay this literally

robin hood hands down any experiment

i've ever done has the best

cryptocurrency pricing you're not paying

the coinbase pro five dollars

you're not paying the spreads that

you're paying at other cryptocurrency

apps and i know people hate

hearing that because well hey if it's

not you're you know if you don't have

control of your coin it's not your coin

you know you don't have your key it's

not your coin

i get that you they don't have the

crypto wallets i totally totally get it

folks i don't know how they do it but

they've got the cheapest pricing

and they still made 87.5 million dollars

off cryptocurrencies

i mean that's like 18 to 20 but still oh

my gosh

on interest lending margin interest 27

million

securities lending see what did i say

share lending 35 million

interest on segregated cash uh so cash

people having their their

cash accounts a million bucks i mean

that's that's nothing uh total net

revenues 522 million dollars

total operating expenses uh coming in at

463 million

mind you these operating expenses have

exploded

uh looking at some of their opex here

general and administration

and these are uh let's see these are i

want to go back to the first page here

so

marketing operations these are comparing

quarters to quarters

yeah i mean you've had actually an

explosion in some of these expenses we

talked about brokerage

going from first quarter expenses 30

million

to uh to 41 million let me see how they

loop it over on this particular page

here because it's a little different

here we have first three months of march

oh

okay okay okay now they're comparing the

first three months of 2021

not to the last three months of 2020 but

to the first three months of 2020. so

this gives you a year over year overview

they are spending double on brokerage

and transaction from 20 million to 41

million they're spending

uh over three and a half x on technology

and development

from 33 million to 116 million

operations grew from 21 mil to 66 mil

that's a triple

you've got marketing that went up 46

year-over-year so maybe they do like a

beginning of the year blitz

something else i'm going to take a peek

at general and admin

went up almost 4x 34 million

to actually that's about yeah that's

about 4x uh 34 million to 137

million uh for net total expenses of 463

million again

if you got rid of those warrant

liabilities this would be a very

profitable company

at about an annualized dollar

earnings per share for 2021

uh that's that's very very very good

now i'm just going to verify these

numbers here because you've got if you

take

uh 522 minus 463 that's about

60. we've got 60 in 1060 million dollars

we've got 200 well and then multiply by

4 so 6 times 4 is 24.

yeah and you've got 230 million shares

outstanding so there'll be 240 mil

in in a net 60 times four 240 mil in

that

they've got a diluted share count of 230

mil it's about a dollar eps annualized

per uh uh i mean in in valuation

well not in valuation and what they're

earning a dollar per share without those

warrant liabilities

now those war liabilities are gonna

throw a lot of people for a while i

think

uh people are probably gonna go oh my

gosh robin hood went from profitable in

the

in in the last quarter of 2020 to losing

massive amounts of money the first

quarter

i think there's gonna be a lot of

clickbait i don't think people are gonna

get into the weeds on the warrants

i've got a lot more reading to do but

this is my first impression this is

really really interesting let's talk

about valuation though okay

so wise if they are

uh if they're trading at uh uh you know

ten dollars a share

that would put them at a uh

2.3 billion dollar company because we've

got

230 million shares times 10 a share puts

them at 2.3 billion they're not gonna

sell for that

uh let's say they sold for a hundred

times or a hundred dollars

per share that would put them somewhere

around a valuation

of 23 billion dollars

so fast clocking in at 16 bill so far is

not

probably going to be profitable until

2022 2023 minus these warrant

liabilities

this company's printing cash folks it's

printing money i don't know how they're

printing so much money on the

cryptocurrencies i want to get to the

bottom of that

i want to get to the bottom of how

they're printing so much money on these

equity transactions and

options holy smokes uh market makers

here on citadel folks

27 of their business is going to citadel

7 27 then you've got uh 12 percent going

to

uh suscu hana international group

taimoshan limited 11

entities affiliated with wolverine

holdings nine percent other less than 20

less than 10 each totaling at 22

uh and and then you've got some other

things as well so uh but citadel

at uh almost a third uh you should

really say just over a fourth

of uh of of their market making revenues

so

uh very very very very very interesting

s1 i cannot wait to read the rest of

this i'll bring you more updates thank

you so much for watching this if you

like this kind of content realize

i just got this document not that long

ago this is the first impression here we

just one took this thank you so much for

watching this

really appreciate you and folks we'll

see you in the next one with more

details bye