Last week’s frenzy over the IPO of the FinTech company that revolutionised the trading world created history in an unexpected way. Despite the Robinhood (NASDAQ:HOOD) share price having a somewhat muted first day of trading, it did manage to raise $2bn, and the stock has since been on the rise. Today, it’s trading around $46. That places the total market capitalisation of the business at just over $39bn. But can it continue to grow higher? And should I be adding this business to my portfolio? Let’s take a look.

What is Robinhood?

Robinhood is a financial services company that provides a commission-free investing solution to the American public. It offers the ability to buy and sell stocks, equity-traded funds (ETFs), options and cryptocurrencies. 

In today’s digital world, Robinhood has the edge of providing one of the most popular mobile and web platforms for trading. In fact, according to Mobile Marketing Reads, it has risen to the #1 downloaded application in Apple’s App Store. And thanks to the quick and painless account opening process, it now has around 18 million users as of March this year. That’s roughly 150% higher than in March 2020.

In my opinion, this is quite an impressive achievement. And if Robinhood can continue to expand its user base at this rate, I wouldn’t be surprised to see its share price climb higher.

Robinhood’s share price on IPO day

The stock of Robinhood opened at $38 per share on 29 July this year. But despite investor expectations, its first day of trading was somewhat disappointing since it closed down around 8% at $34.82.

Vladimir Tenev and Baiju Bhatt, the brains behind Robinhood, wanted to create history through their hotly anticipated IPO. And in a way, they succeeded by having one of the worst opening-day performance for a company of its size. But I think it’s fair to say this wasn’t the kind of history these leaders were aiming for.

A rough start to the public markets can be a sign of trouble ahead. But it’s not always the case. Facebook also had a lacklustre IPO before its stock quickly reversed. And it seems something similar might be happening for the Robinhood share price since it’s started rising this week despite the lacklustre IPO.

Some impeding growth hurdles

With people stuck at home during the pandemic, many individuals began investing their money in the markets. And thanks to the widespread popularity of Robinhood, the first saw its revenue surge by 245%, reaching $959m by the end of 2020. This boost was even sufficient to push the business into profitability.

But as encouraging as this growth is, there seem to be several regulatory hurdles on the horizon. Robinhood is no stranger to regulatory investigations, given it was found guilty of misleading its customers. This particular instance led to a $57m fine with an additional $12.6m interest charge to the Financial Industry Regulatory Authority.

The firm is also starting to see increased pressure from regulatory surrounding its controversial Payment for Order Flow transaction model, as well as new potential legislation regarding cryptocurrencies. I wouldn’t be surprised to see the Securities Exchange Commission start to interfere with operations. However, whether or not Robinhood can overcome these hurdles is yet to be seen. But suppose, new regulations begin to impede the firm’s growth. In that case, I wouldn’t be surprised to see the Robinhood share price take a hit.

Final thoughts on the Robinhood share price

Robinhood has proven itself to be a popular trading platform for many retail investors. But it’s far from the only one out there. Big names like Charles Schwab and TD Ameritrade undoubtedly create fierce competition for the firm.

And yet, the fact that Robinhood has managed to become a leader despite this fills me with confidence. Therefore I believe the Robinhood share price can continue to climb higher over the long term. So, I am considering it as a potential addition to my portfolio.