By Hannah Lang and Mehnaz Yasmin

(Reuters). -Commission-free brokerage Robinhood Markets Inc (NASDAQ) reported a loss of $423 Million in its latest quarter. Shares tumbled 15% after hours trade, even though revenue exceeded analysts’ expectations.

Robinhood posted a loss of $423million or $0.49 per share for the three months ending December. The company had net income of $7million a year prior to its IPO.

Robinhood shares plunged as high as 15% to $9.98 during extended trading after the results. Its share price in July 2013 was $38, while its August record was $85.

Robinhood’s third quarter results as an open company saw total revenue reach $363million, up from $318million a year ago.

Refinitiv data shows that analysts expected an average of $362.14million in revenue, according to IBES statistics.

Robinhood’s fourth-quarter costs increased 162% over the prior year. This led to the company suffering a net loss.

Robinhood Chief Financial Officer Jason Warnick spoke with journalists and attributed a lot of the cost to increase headcount and share-based pay.

“We think we’re in a really good position to start slowing that from here,” he said.

Revenue from equity trading fell 35% to $52million, but transaction-based revenues from crypto currencies soared 304% to $48M in the fourth quarter.

Robinhood, like many other tech startups, has not turned a profit since its IPO. While revenue was positive, Robinhood’s monthly active users fell 8% to 17.3million in the last quarter as more retail investors pulled out of the market.

Warnick stated that there is no evidence to indicate customers are losing interest.

Robinhood may become profitable by 2022 according to him, however, 2023 would be a better target depending upon market conditions as well as the launch of new products.

Robinhood saw a surge in popularity during the pandemic. Homebound investors used its app to trade stocks, and Robinhood had a good run. In January 2013, it was the epicenter of a trading frenzy for meme stocks.

But last year’s retail trading frenzy also precipitated a number of regulatory probes. Robinhood’s legal fees soared from $1.4million to over $136million in 2019, and more than $136million by July 2021.

The Federal Reserve increased trading activity when it injected large amounts of liquidity into the capital markets. Investors raced to cash in during the boom. However, the Fed now expects to reduce asset purchases as well as raise interest rates.

Recently, cryptocurrencies were under attack. The largest cryptocurrency, cryptocurrencies, fell 50% to $32,951 in the last week.

Robinhood anticipates that total revenue for the first quarter will fall to $340m, which is 35% less than the previous year when Robinhood’s meme stock rally helped boost trading.

Several analysts believe Robinhood’s share price could be pressured https://www.reuters.com/business/finance/robinhood-shares-stumble-trading-frenzy-wanes-regulators-circle-2022-01-27 by worries about a potential crackdown from the U.S. Securities and Exchange Commission (SEC) on payment for order flow (PFOF) — whereby brokers route trades to wholesale market makers in return for a fee.

Robinhood received approximately 72% from PFOF or other transaction rebates during the fourth quarter 2021.

The SEC has not yet stated its intention to ban it, although it indicated that they are open to exploring other avenues to make revenue. This could include executing clients’ orders internally.

Robinhood announced this week that it has built a net capital position in excess of 21x what the Securities and Exchange Commission requires, and other measures to prevent trading restrictions.