Robinhood’s new earnings report raises concerns about the company’s reliance on crypto trading

Well, Robinhood investors can’t say they weren’t warned.

After the stock-trading app announced its intention to go public earlier this year, one of the most notable revelations from its S-1 prospectus filing with the Securities and Exchange Commission was the extent to which its business relied on cryptocurrency trading. Crypto accounted for 17% of Robinhood’s revenues in the first quarter of this year; what’s more, those crypto revenues were themselves heavily dependent on low-value meme-coins like Dogecoin, which alone represented 34% of the company’s crypto turnover.

The extent to which Robinhood was relying on crypto to drive its business reportedly raised enough eyebrows at the SEC to slow its march to the public markets. But neither that, nor the company’s reliance on payment for order flow to prop up its no-free trading model, nor its dependency on the millennial-fueled meme-stock craze to grow its business, ended up derailing its IPO. Robinhood debuted at $38 a share in late July—and after some early hiccups, it’s been a mostly steady, if somewhat underwhelming ride for the stock. Still, the company has had no shortage of doubters on Wall Street—with various traders foretelling of “a lot of uncertainty about the future” for Robinhood and “a rollercoaster ride to come” on the public markets.

That rollercoaster dipped into a freefall in the wake of Robinhood’s third-quarter earnings report after Tuesday’s close. Robinhood shares fell more than 10% Wednesday and dipped below their IPO price, with the main culprit being (surprise!) a sharp decline in crypto-related revenues that dragged down the company’s results. Third-quarter turnover stood at only $365 million—down $200 million from the second quarter, and missing analyst estimates by a longshot. Crypto revenues came in at just $51 million, which were less than a quarter of the $233 million that Robinhood generated from digital assets in the previous period. As far as its bottom line, Robinhood posted a net loss of $1.32 billion in the third quarter, which also missed analyst expectations for the worse.

Those underwhelming results coincided with an 11% drop in monthly active users compared to the second quarter, or 2.4 million fewer active users. Meanwhile, it doesn’t appear that investors can bet on sunnier earnings on the near-horizon, with Robinhood warning that the retail-trading slowdown that hindered its third-quarter results will likely persist through the end of this year.

Despite being anchored down by poor crypto-trading numbers, it seems unlikely Robinhood either can or will look to distance itself from the crypto revolution. CEO Vlad Tenev talked up its development of a crypto wallet product that he said now has a waitlist exceeding one million users, while people are clamoring for Robinhood to add the red-hot Shiba Inu token to its platform. But even Shiba Inu’s success sheds light on the extent to which the company is swimming in volatile, regulatorily murky waters. On Robinhood’s earnings call Tuesday, Tenev cited an “uncertain and evolving” regulatory environment around new coins and crypto products, and said the company would have to “carefully evaluate” whether it could expand its crypto offerings beyond the seven tokens it currently allows customers to trade.

Of course, shaky quarterly results are a risk that all investment brokerages have to reckon with; revenues and profits usually ebb and flow with the overall state of the equities markets, and boom periods will always be followed by a slowdown at some point. But Robinhood’s latest results depict just how shaky things are liable to get for the company—and just how much its business continues to depend on a fledgling sector that remains highly unpredictable.

RUNNING AWAY WITH IT: In other public market news this week, Wednesday brought the stock market debut of e-commerce startup Rent the Runway. The company raised $357 million on the Nasdaq after IPO’ing at $21 a share—the top-end of its expected range—in a listing that initially valued it at north of $1.3 billion.

Despite having a rough go of things during the pandemic, Rent the Runway has seen its user base rebound prolifically this year on the back of an increasingly popular, rent-what-you-wear business model that caters in high-end, designer clothes. In an interview with Fortune, co-founder and CEO Jennifer Hyman talked up the IPO as “a step forward for all women-led companies,” and added that it would give Rent the Runway the liquidity needed to grow its “capital-intensive business.”

Unfortunately, Wednesday’s trading didn’t go particularly well for the company. After surging to north of $24 a pop at one point, shares eventually dipped below their IPO price and closed the day’s trading down 8%, at $19.29. Early days.

Rey Mashayekhi
Twitter: @reym12
Email: rey.mashayekhi@fortune.com

Anne Sraders curated today’s Term Sheet.

VENTURE DEALS

- Hinge Health, a San Francisco-based provider of a digital clinic to treat musculoskeletal pain, raised $400 million in Series E funding at a $6.2 billion valuation. Tiger Global and Coatue Management led the round. Alkeon and Whale Rock also acquired a stake as part of a $200 million secondary investment.

- Acko, an India-based online insurance startup, raised $255 million funding at a $1.1 billion valuation. General Atlantic and Multiples Private Equity led the round and were joined by investors including CPPIB, Lightspeed Growth, Intact Ventures, and Munich Re Ventures.

- Alchemy, a San Francisco-based blockchain developer platform, raised $250 million in Series C funding at a $3.5 billion valuation. Andreesen Horowitz led the round and was joined by investors including Lightspeed, Redpoint, Coatue, Addition, DFJ, and Pantera. 

- Dragos, a Hanover, Md.-based cybersecurity firm for industrial infrastructure, raised $200 million in Series D funding at a $1.7 billion valuation. Koch Disruptive Technologies, an investment arm of Koch Industries, and funds managed by BlackRock led the round.

- Yugabyte, a Sunnyvale, Calif.-based open source distributed SQL database for cloud applications, raised $188 million in Series C funding. Sapphire Ventures led the round and was joined by investors including Alkeon Capital, Meritech Capital, and Wells Fargo Strategic Capital, Lightspeed Venture Partners, 8VC, Dell Technologies Capital, and Wipro Ventures.

- Rad Power Bikes, a Seattle-based ebike company, raised $154 million in funding. Fidelity Management & Research led the round and was joined by investors including T. Rowe Price, Counterpoint Global (Morgan Stanley), Vulcan Capital, Durable Capital Partners LP, and TPG’s The Rise Fund. 

- Persefoni, a Tempe, Ariz.-based climate and carbon accounting management platform, raised $101 million in Series B funding. Prelude Ventures and TPG’s The Rise Fund co-led the round and were joined by investors including Clearvision Ventures, Parkway Ventures, Bain & Co, EDF (Électricité de France), Sumitomo Mitsui Banking Corporation (SMBC), The Ferrante Group, Alumni Ventures Group, New Valley Ventures, NGP Energy Technology Partners, and Sallyport Investments.

- Lovevery, a Boise, Idaho-based early childhood product company, raised $100 million in a Series C funding round led by TCG and was joined by investors including the Chan Zuckerberg Initiative, GV, Reach Capital, and SoGal Ventures. 

- Daring Foods, a Los Angeles-based plant-based chicken producer, raised $65 million in Series C funding. Founders Fund led the round and was joined by investors including D1 Capital Group and individual investors including Naomi Osaka, Cameron Newton, Steve Aoki, and Chase Coleman. 

- Abacus.ai, a San Francisco-based autonomous AI platform that helps companies create deep learning systems, raised $50 million in Series C funding. Tiger Global led the round and was joined by investors including Coatue, Index Ventures, and Alkeon Capital.

- TIFIN, a New York City-based AI-powered personalized wealth and asset management platform, raised $47 million in Series C funding. Investors included Hamilton Lane, J.P. Morgan Asset Management, Morningstar, and Broadridge.

- Drip Capital, a Palo Alto, Calif.-based cross-border trade finance platform, raised $40 million in Series C funding led by TI Platform and was joined by Accel, Sequoia, Wing VC, Irongrey, and GC1 Holdings.

- QuickNode, a Miami-based blockchain infrastructure platform that supports applications, raised $35 million in Series A funding. Tiger Global led the round and was joined by investors including Reddit co-founder Alexis Ohanian's Seven Seven Six, Soma Capital, Arrington XRP Capital, Crossbeam, and Anthony Pompliano.

- Kebony, a Norway-based environmentally friendly modified wood producer, raised €30 million ($35 million) in funding led by Jolt Capital and Lightrock.

- Butler Hospitality, a New York-based hotel services and hospitality provider, raised $32 million in funding from Shamrock Holdings, Mousse Partners, and Maywic Select Investments.

- SimScale, a Munich, Germany-based provider of simulation software to test performance and efficiency, raised €25 million ($29 million) in extended Series C funding. Draper Esprit and Insight Partners co-led the round and were joined by investors including Earlybird, June, Vsquared and USV.

- Tactile Mobility, an Israel-based tactile data and virtual sensing technology startup to improve driving, raised $27 million in Series C funding. Delek Motors led the round and was joined by investors including Goodyear Ventures and Porsche Ventures.

- SlashNext, a Pleasanton, Calif.-based provider of defense software to protect against spear phishing and other threats, raised $26 million in Series B funding from investors including Tom and Matt Gallo, Telia Group, the ACTIVE Fund of the Ayala group, Norwest, Wing, and Alter Ventures. 

- OurCrowd, an Israel-based venture firm, raised $25 million from SoftBank’s Vision Fund 2. OurCrowd will enter a strategic partnership with SoftBank Investment Advisers (SBIA) as part of the deal. 

- Autofleet, an Israel-based management and optimization platform for vehicle fleets, raised $20 million in Series B funding. Keyframe Capital led the round and was joined by investors including Fujitsu Ventures Limited, Goodyear, Mizmaa Ventures, Maniv Mobility, and Next Gear Ventures.

- Beans.ai, a Palo Alto-based location intelligence and mapping platform for logistics focused on complex addresses, raised $17 million in funding. Saama Capital and Amit Singhal formerly of Google led the round and were joined by investors including Venture Highway, Mubadala Capital, and individual investors.

- Moralis, a Sweden-based blockchain development platform to build decentralized apps, or dApps, raised $13.4 million in seed funding led by EQT Ventures. 

- Xeal, a Los Angeles-based EV charging stations technology firm, raised $11 million in Series A funding and a previously unannounced $3 million in seed funding from investors including ArcTern Ventures, Moderne Ventures, LPC Ventures, Harrison Street, Hunt Companies, Align Real Estate, former Microsoft executive Ramez Naam, and Pasadena Angels.

- Friends With Benefits (FWB), a decentralized autonomous organization, or DAO, raised $10 million in funding. Andreessen Horowitz led the round and was joined by investors including Pace Capital, Kindred Ventures, Spark Ventures, and Li Jin.

- Viakoo, a Mountain View, Calif.-based IoT device security platform for companies, raised $10 million in Series A funding. Shasta Ventures led the round and was joined by investors including Stanley Black & Decker, PivotNorth Capital, and Blue Fog Capital.

- Instoried, an India-based AI tool for analyzing the tone and sentiment of text before publication, raised $8 million in funding. Pritt Investment Partners and 9Unicorns led the round and were joined by investors including Mumbai Angels, Venture Catalysts Angel Fund, and SOSV. 

- Needed, a Los Angeles-based startup focused on pregnancy nutrition and care, raised $5.8 million in seed funding, per Crunchbase. Seae Ventures and Sekhmet Ventures led the round and were joined by investors including Crescent Ridge Partners and Peterson Partners.

- Atlys, a San Francisco-based startup that helps make filling out visa applications more efficient, raised $4.3 million in seed funding. Andreessen Horowitz led the round and was joined by investors including entrepreneurs Ben Silbermann and Evan Sharp, The Chainsmokers’ Mantis VC, Long Journey Ventures, South Park Commons Fund, Endeavor, and individual investors. 

- Union54, a Zambia-based firm that lets companies issue debit cards without a bank or processor, raised $3 million in seed funding, per Techcrunch. Tiger Global led the round and was joined by investors including Runa Capital, Ace & Company, Todd & Rahul Angel Fund, and Vibe VC.

- Ruby.Exchange, an NFT-integrated Automated Market Maker (AMM) and decentralized exchange, raised $2.8 million in funding from NGC, Flow Ventures, Wintermute, the SKALE Ecosystem Fund, Morningstar Ventures, Yield Ventures, HashKey, CitizenX, ZBS Capital, and angel investors. 

- Torpago, a San Francisco-based corporate card and expensing platform startup, raised $2 million in seed funding and $75 million in warehouse financing. Operate led the funding round and was joined by investors including Clear Haven Capital Management, former Summit Partners managing partner Walter Kortschak, and angel investors.

- Rothy’s, a San Francisco-based sustainable direct-to-consumer footwear brand, is in talks to raise funding that could value the company at $1 billion, per Bloomberg. 

PRIVATE EQUITY

- Brookfield Business Partners (NYSE:BBU), an affiliate of Brookfield Asset Management, agreed to acquire the lottery business of Scientific Games Corporation (NASDAQ: SGMS), a Las Vegas-based gaming and lottery entertainment company, for $6 billion. 

- Bain Capital Life Sciences and Bain Capital Private Equity invested up to $300 million in Cardurion Pharmaceuticals, a Boston-based clinical-stage biotech focused on cardiovascular disease treatments. 

- HSO, backed by the Carlyle Group, acquired CRM Dynamics, an Ontario-based customer relations management firm using Microsoft Dynamics 365. Financial terms weren’t disclosed. 

- Sverica Capital Management acquired a majority stake in Automated Control Concepts, a Neptune, N.J.-based firm providing quality control, cybersecurity, and information products and services to utility and manufacturing companies. Financial terms weren’t disclosed. 

- Loyal Companies recapitalized SpaceJet Media, a Houston-based advertising platform. Financial terms weren’t disclosed. 

EXIT

- Monte Nido & Affiliates acquired Walden Behavioral Care, a Waltham, Mass.-based behavioral health services provider focused on eating and mood disorders, from Seacoast Capital. Financial terms weren’t disclosed. 

- Prophix, owned by Hg Capital, acquired Sigma Conso, a Belgium-based corporate performance management software and services provider, from Fortino Capital. Financial terms weren’t disclosed. 

OTHERS

- The European Commission opened an antitrust investigation into Nvidia's $40 billion acquisition of ARM, the U.K.-based chip designer. 

- T. Rowe Price Group (NASDAQ: TROW) agreed to acquire Oak Hill Advisors, a New York-based alternative credit manager, for $4.2 billion in cash and stock.

- Phillips 66 (NYSE: PSX) agreed to acquire the remaining units of Phillips 66 Partners (NYSE: PSXP), the Houston-based master limited partnership owning and operating crude oil and natural gas liquids pipelines, for $3.4 billion in all stock. 

- FirstCash agreed to acquire American First Finance, a Dallas-based buy-now-pay-later firm, for $1.2 billion in cash and stock. 

- Cint Group AB agreed to acquire Lucid Holdings, a New Orleans-based analytics and survey marketplace, for roughly $1.1 billion in cash and shares. 

- EBANX acquired Juno, a Brazil-based payments solutions provider. Financial terms weren’t disclosed. 

- Mimecast (NASDAQ: MIME), a London-based email cybersecurity provider, is reportedly looking into a potential sale, per the Wall Street Journal. 

- Amazon’s Climate Pledge Fund invested in CMC Machinery, a sustainable packaging maker that eliminates the need for single-use plastic packaging; Resilient Power, an EV charging technology company; and Infinium, a low carbon electrofuels company. Financial terms weren’t disclosed. 

IPO

- Nu Holdings, known as Nubank, a Brazilian neobank, confidentially filed for an IPO to reportedly list on the NYSE, per Bloomberg. The transaction could value Nubank at over $50 billion. Berkshire Hathaway backs the firm. 

- Paytm, an Indian payments company, is reportedly seeking a valuation of around $20 billion in its IPO, planning to raise as much as 183 billion rupees ($2.4 billion), per outlets including Bloomberg. SoftBank, Berkshire Hathaway, and Ant Group back the firm.

- Ensemble Health Partners, a Cincinnati, Oh.-based revenue cycle management technology company for health systems, postponed its IPO. It had planned to raise up to $649 million in an offering of 29.5 million shares. The company reported $600 million in net revenue in 2020 and net income of $101 million. Golden Gate Capital and Bon Secours Mercy Health back the firm.

- Arhaus, a Boston Heights, Ohio-based home furnishing company, plans to raise up to $355 million by offering 22.9 million shares priced between $14 to $17. The company reported $507 million in net revenue in 2020 and net and comprehensive income of $18 million. Freeman Spogli & Co. backs the firm.

- Solo Brands, a Southlake, Texas-based outdoor gear and apparel company, raised $219 million by offering 12.9 million shares at $17. The company posted $133 million in net sales in 2020 and a net loss of $24 million. Summit Partners backs the firm.

- Real Good Food, a Cherry Hill, New Jersey-based gluten-free frozen food company, plans to raise $80 million by offering 5.3 million shares priced between $14 to $16. The company posted $39 million in revenue in 2020 and reported a $16 million net loss. Fidelity Investments backs the firm.

F+FS

- Frazier Healthcare Partners, a Menlo Park, Calif-based growth and venture firm, raised $830 million for its Frazier Life Sciences Public Fund.

- Fifty Years, a San Francisco-based early stage venture firm, raised $90 million for its third fund.

PEOPLE

- Dubin Clark, a Boston and Jacksonville Beach, Fla.-based private equity firm, promoted Matthew Broullire to principal and Brooke DelPiccolo to senior associate. 

- Goldfinch Partners, a Seattle-based private equity firm, added Matthew F. Herman as a partner and general counsel.

- Felicis Ventures, a Menlo Park, Calif.-based venture firm, added Michelle Delcambre as operating partner.

- Mountaingate Capital, a Denver-based private equity firm added Brandon Hall as vice president and promoted Corbin Barnds to senior associate. The firm also added Trip Renard and Bryce Dietz as associates.