Robinhood (HOOD) is determined to beat the headwinds.
The brokerage, like rivals including Charles Schwab (SCHW) and Coinbase (COIN) -- is facing a slowdown in trading from retail investors. This slack is reflected in, for example, the drop in the volumes on cryptocurrency exchanges.
But it was last year's euphoria around digital currencies that led to a golden period for fintechs like Robinhood.
Indeed, with its stated goal to democratize finance, Robinhood had managed to attract millions of retail investors, in particular a new cohort made up of Gen-Zers and millennials who were eager to take their first steps into finance and trading.
The company managed to disrupt the entire brokerage industry by cutting fees -- ultimately forcing much larger competitors to follow suit.
But the fall in cryptocurrency prices, coupled with the return to Earth of the meme-stock phenomenon -- companies with outdated business models like GameStop (GME) and AMC Entertainment (AMC) that nonetheless drew huge interest and trading from readers of sites like Reddit -- devastated Robinhood.
Crypto Slump
The platform has since faced a drop in revenue, but that effort hasn't been easy. The price of bitcoin is currently around $41,000 compared with a bit more than $69,000 on Nov. 10, at the height of cryptomania.
The most prominent of the cryptocurrencies has thus lost nearly 41% in five months, a move unlikely to encourage newer traders to invest in crypto anytime soon.
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The stock-trading app warned in January that it expected first-quarter revenue of less than $340 million, down 35% compared with 2021, after monthly active users fell to 17.3 million in fourth-quarter 2021 from 18.9 million in the third quarter.
One of the worrying signs is that revenue generated from crypto trading is steadily declining. Robinhood reported crypto trading revenue of $233 million in the second quarter of 2021 but just $48 million in the fourth quarter.
We'll get a little clearer idea of Robinhood's situation on April 28, when the Menlo Park, Calif., company reports its first-quarter financial results.
Fighting Back
Robinhood is multiplying initiatives to change the dynamic.
The brokerage has recently increased the number of cryptocurrencies available to trade on its platform. Among these digital currencies is Solana, a native token of the Solana blockchain, which enables developers to build apps for decentralized finance and web 3, the new generation of the internet.
Interested investors also can trade shiba inu, one of the most popular meme coins, along with dogecoin, Tesla (TSLA) Chief Executive Elon Musk's favorite crypto.
Robinhood has also made a huge move: The fintech has rolled out a crypto wallet, which enables its users to trade crypto outside Robinhood without the need to cash out and go to another platform to invest.
Another key change: Users can also now directly use their crypto for different transactions without the need to liquidate them.
That's to encourage retail investors in the U.S. to use the platform more. Now, ....
Going Global
... Robinhood has just taken a major step. The brokerage house wants to seek international growth, and to that end it has acquired the British crypto firm Ziglu.
Ziglu enables U.K.-based customers to buy and sell 11 cryptocurrencies, earn yield via its Boost products, pay using debit cards, and move and spend money, even abroad, without fees, according to the firm.
Robinhood makes clear that this deal -- terms weren't disclosed -- is designed to help enable expansion into Europe.
"In the near term, nothing will change for current Ziglu customers," Robinhood said in a blog post. "Longer term, we’ll integrate Ziglu more fully into Robinhood, bring the Robinhood brand overseas, and work to expand operations beyond the UK into Europe."
Robinhood Co-Founder and Chief Executive Vlad Tenev emphasizes this point because Robinhood must seek to grow organically and by acquisition.
“Ziglu’s impressive team of deeply experienced financial services and crypto experts will help us accelerate our global expansion efforts,” said Tenev.
“Together with the Ziglu team, we’ll work to leverage the best of both companies, exploring new ways to innovate and break down barriers for customers across the UK and Europe.”
"As part of Robinhood, we’ll supercharge Robinhood’s expansion across Europe and bring better access to crypto and its benefits to millions more customers," Mark Hipperson, founder and CEO of Ziglu, added.
Robinhood shares have lost nearly 70% of their value since the initial public offering last July. The stock price was $11.56 on April 19, less than a third of the $38 it registered on its first day on Wall Street. Its market capitalization has shrunk by more than $22 billion in less than a year.
