Robinhood Markets Inc HOOD shares are once again back below $10 and are now down more than 75% from their $38 IPO price in July 2021. New Constructs CEO David Trainer wanted investors to stay away from Robinhood even before its IPO was completed, and Trainer said this week Robinhood investors may still have more pain ahead.
Trainer's IPO Call: In July 2021, Benzinga reported on how Trainer had called Robinhood a “bad bet for investors with alarming risk.” Now that the stock has dropped all the way below $10, Trainer said Tuesday that Robinhood's growth has evaporated, and its business is nowhere near profitable.
Robinhood has burned through $3.5 billion in cash over the past 12 months, and Trainer said raising additional capital would likely be difficult and costly for Robinhood at this point.
"Robinhood’s severe cash crisis, along with competitive challenges, puts the company’s stock at significant risk of declining to $0 per share," Trainer said.
Underperforming Peers: From a fundamental perspective, Trainer said Robinhood's net operating profit after-tax (NOPAT) margin, invested capital turns and return on invested capital all fall well short of leading competitors, including Coinbase Global Inc COIN, Interactive Brokers Group, Inc. IBKR and Charles Schwab Corporation SCHW.
Robinhood has $182 million in debt, $94 million in outstanding employee stock options and continues to burn cash, and Trainer said there is a high likelihood the company will eventually need to dilute shareholders to raise additional capital.
Benzinga's Take: Regardless of whether or not Robinhood shares eventually drop to $0, there's not much to like about the direction the company is headed at the moment. In the most recent quarter, Robinhood reported a 43.7% drop in revenue, a $295 million net loss and a drop in monthly active users. The company also said it plans to lay off 23% of its workforce.
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