Robinhood’s Generosity Isn’t Cheap For Shareholders

This column is part of the Heard on the Street stock-picking contest. You’re invited to play along with us here.

The stock-trading frenzy seems to be calming down for some of Robinhood Markets ’ customers. The same comedown could happen to its shareholders at current prices.

After an extraordinary period that helped propel the company to a public listing, Robinhood’s stock-trading activity is no longer surging. Daily average revenue trades in equities not only dropped from the huge first quarter but they were flat from the second quarter a year ago, even as Robinhood added well over 10 million accounts in that time span.

In effect, the average funded account traded stocks roughly half as often in the second quarter as it did in the first quarter, or in the second quarter of last year. Equities transaction-based revenue was down from $71 million in the second quarter a year ago to $52 million.

For now, though, cryptocurrency is making up for that. Not only did customers trade crypto more often in the second quarter, but it also generated a lot more revenue per trade than in the past. Crypto transaction revenue was $5 million in the second quarter of 2020 and exploded to $233 million a year later.