[HN Gopher] Robinhood S-1 IPO
___________________________________________________________________
Robinhood S-1 IPO
Author : marc__1
Score : 181 points
Date : 2021-07-01 17:18 UTC (5 hours ago)
(HTM) web link (www.sec.gov)
(TXT) w3m dump (www.sec.gov)
| tofuahdude wrote:
| Risk factors are lovely:
|
| We have been subject to regulatory investigations, actions and
| settlements and we expect to continue to be subject to such
| proceedings in the future, which could cause us to incur
| substantial costs or require us to change our business practices
| in a manner materially adverse to our business.
|
| We are involved in numerous litigation matters that are expensive
| and time-consuming, and, if resolved adversely, could harm our
| reputation, business, financial condition or results of
| operations.
|
| Our platform has been, and may in the future be, subject to
| interruption and instability due to operational and technological
| failures, whether internal or external.
| Lionga wrote:
| The illegal shit they do is just a "cost of doing business" for
| them. It is just hard to calculate how much of a kickback the
| FINRA and SEC would like to have.
| sithlord wrote:
| I am 100% sure most companies can and do have those exact same
| risk factors, they don't really mean that much.
|
| Any company that operates in a highly regulated area
| (finance/health/gambling/etc) are going to have regulatory on
| their risk factors.
|
| Any Company whose business is run on an app or a website is
| going to have the tech failure one.
| elliekelly wrote:
| Most companies that go public haven't recently violated
| securities laws and most don't readily admit that they'll
| probably do it again. (But at least they're truthful in their
| disclosure! As required.) They also have the boilerplate
| "this is a highly regulated industry" language as a separate
| risk:
|
| > Our business is subject to extensive, complex and changing
| laws and regulations, and related regulatory proceedings and
| investigations. Changes in these laws and regulations, or our
| failure to comply with these laws and regulations, could harm
| our business.
|
| This risk also stood out to me because it's something I
| usually associate with SPACs:
|
| > As a result of our recent settlement with the SEC, we are
| currently considered an "ineligible issuer," which limits our
| ability to use certain free writing prospectuses in
| securities offerings and will delay our ability to qualify as
| a "well-known seasoned issuer" in the future.
|
| SPACs are an ineligible issuer because they've been a blank
| check company, shell company, or penny stock issuer in the
| last three years. While I don't have many nice things to say
| about SPACs the ineligible issuer language is pretty benign
| boilerplate in that situation.
|
| RH, on the other hand, is an ineligible issuer because they
| were C&D'd by the SEC for violating the anti-fraud provisions
| of the federal securities laws in the last three years.
| Companies typically seek to avoid committing securities fraud
| in the run up to their IPO. So while the risk factor itself
| (not a WKSI) isn't necessarily unusual the _reason_ for the
| risk is and it speaks directly to management's (at best)
| inability to appropriately manage the regulatory risk or (at
| worst) lack of trustworthiness.
| cmiles74 wrote:
| I'm skeptical that this claim is true. Even a cursory look at
| news articles related to Robin Hood shows that these concerns
| are way more than boilerplate legalese.
| mym1990 wrote:
| I think it is one thing to have regulatory risks(of course
| those are always present), but another to have a recent
| history of investigation and to be wrapping up the largest
| fine in history.
|
| Obviously some or even many people will take these risks as a
| possible promise of greater returns and for the sake of Rh, I
| hope they get better and better at navigating the regulatory
| waters. It would be interesting to see the financials if and
| when another prolonged downturn happens.
| tofuahdude wrote:
| "involved in numerous litigation matters" and "have been
| subject to regulatory investigations ... expect to continue
| to be subject to such proceedings" coming in on the heels of
| record-setting fines moves these risk factors from the usual
| corporate boilerplate to quite acute issues.
| LeifCarrotson wrote:
| The share count and price are redacted, though likely to be
| somewhere in the $30 billion range. Regardless, that helps put
| the $70 million fine from _yesterday_ [1] in context.
|
| It was the largest fine in FINRA history, but will it have been
| worth it? The $65 million fine in December suggests they weren't
| sufficiently deterred to change.
|
| [1] https://news.ycombinator.com/item?id=27690543
| hardtke wrote:
| $81B in assets under management vs. Fidelity with $10T? At some
| point, your revenue is capped at a fraction of a percent of
| assets under management.
| kgwgk wrote:
| If you have high enough turnover in your account sky is the
| limit.
| s1artibartfast wrote:
| >The $65 million fine in December suggests they weren't
| sufficiently deterred to change
|
| People keep saying this, but the FINRA fine was for actions
| that took place _before_ the 2020 SEC fine, and the SEC fine
| was for actions in 2015-18.
|
| It's not like they have a time machine.
| lame-robot-hoax wrote:
| " A substantial portion of the recent growth in our net revenues
| earned from cryptocurrency transactions is attributable to
| transactions in Dogecoin. If demand for transactions in Dogecoin
| declines and is not replaced by new demand for other
| cryptocurrencies available for trading on our platform, our
| business, financial condition and results of operations could be
| adversely affected.
|
| For the three months ended March 31, 2021, 17% of our total
| revenue was derived from transaction-based revenues earned from
| cryptocurrency transactions, compared to 4% for the three months
| year ended December 31, 2020. While we currently support a
| portfolio of seven cryptocurrencies for trading, for the three
| months ended March 31, 2021, 34% of our cryptocurrency
| transaction-based revenue was attributable to transactions in
| Dogecoin, as compared to 4% for the three months ended December
| 31, 2020. As such, in addition to the factors impacting the
| broader cryptoeconomy described elsewhere in this section, RHC's
| business may be adversely affected, and growth in our net revenue
| earned from cryptocurrency transactions may slow or decline, if
| the markets for Dogecoin deteriorate or if the price of Dogecoin
| declines, including as a result of factors such as negative
| perceptions of Dogecoin or the increased availability of Dogecoin
| on other cryptocurrency trading platforms."
| an_opabinia wrote:
| If you make the easiest to use Ponzi consuming tool, it doesn't
| matter. There will always be more ponzis.
| IntrepidWorm wrote:
| True, but that doesn't mean we should give the best ponzi
| scheme a free pass. It's still a ponzi scheme.
| tofuahdude wrote:
| Anecdotal:
|
| My two under-18 cousins both described using their parent's
| credentials to buy Dogecoin on Robinhood. Great stuff driving
| Robinhood revenue right here.
| reidjs wrote:
| Think of these meme stocks as baseball cards or pokemon for
| gen-z and everything starts to make sense.
| bee_rider wrote:
| Imagining an IPO for a company that enabled baseball card
| and pokemon transactions has not helped me make sense of
| this situation.
| agumonkey wrote:
| 10$ a good amount of defi is trying to sell a few finance
| tricks to teens through web-scale lingo
| [deleted]
| Apocryphon wrote:
| Is NFT support coming soon to Robinhood?
| slg wrote:
| This is true at the level of basic buying and selling.
| However that isn't all that is happening with Robinhood.
| One of Robinhood's "innovations" was making it easier for
| novices to engage in more complicated trading including
| buying on margin, short selling, etc. This allows people to
| lose more money than they initially invested. A kid in the
| 90s wouldn't be buying Pokemon cards on credit with the
| potential to literally bankrupt themselves or their
| parents.
| mym1990 wrote:
| Robinhood has also gamified the trading experience. Once
| a day I get a push notification with something like "here
| are the day's biggest movers, hop on the train before
| it's too late!" and its essentially playing to that
| addictive quality that short term trading can have.
| LeapingPanda wrote:
| Exactly. A push notification like that is preying on the
| fear of missing out (FOMO), which is completely at odds
| with proper assessment and risk management.
| [deleted]
| caymanjim wrote:
| What's most ridiculous about this level of crypto trading
| volume on Robinhood is that you don't even own the crypto you
| trade there. You can't use your own wallet, you can't transfer
| it to your own wallet. Robinhood holds it; you're just gambling
| on their holdings.
| elliekelly wrote:
| It really irks me because "owning" it in that way flies in
| the face of cryptocurrency's supposed raison d'etre:
| anonymous decentralized currency. Dogecoin held at RH is none
| of those things.
| DSingularity wrote:
| What remains of cryptocurrency ethos? It's all about the
| value today.
| mym1990 wrote:
| You could argue that it isn't even about the value, but
| simply the price.
| iso1631 wrote:
| That's not ridiculous, that's the primary purpose of crypto
| j79 wrote:
| It also speaks volumes about "crypto" these days. The vast
| majority of folks I know treat crypto as an investment
| opportunity (albeit, a highly speculative one). They're not
| concerned about blockchain technology or decentralized
| finance.
|
| Robinhood is the perfect platform for them - There's no need
| to "swap" tokens or sign up with exchanges. For the most
| part, RH just "works".
| cwkoss wrote:
| I find it interesting that Elon Musk has tweeted about Dogecoin
| several times in the past day, and his tweets no longer seem to
| be causing price spikes.
|
| A lot of Cryptocurrency twitter is mad at him for his actions
| and statements on Bitcoin, I wonder if that has broken his
| ability to manipulate price with tweets.
|
| If that's the case, probably a bad thing for Robinhood. But
| maybe people will come back around to him with time.
| ttul wrote:
| Dogecoin, created as a joke, is now in an S-1 as a material
| item.
| agumonkey wrote:
| after trump tenure this is the 2nd most absurdist fact about
| humanity the last 20 years to me
| acid__ wrote:
| I would've guessed it had appeared before, but nope never on
| it's own before
|
| https://www.sec.gov/edgar/search/#/q=dogecoin&dateRange=all&.
| ..
| hsaliak wrote:
| Robbin' Da Hood. The GameStop fiasco was unforgivable.
| hpkuarg wrote:
| It would be poetic if the Robinhood IPO marks the local top of
| this bull market :-)
| paulpauper wrote:
| Highly unlikely.
| devops000 wrote:
| Coinbase IPO did it for Bitcoin.
| newfonewhodis wrote:
| Looks like the founders already sold $220M worth of stock:
|
| > 2019 Tender Offer
|
| > In August 2019, we entered into a letter agreement with certain
| holders of our capital stock, pursuant to which we agreed to
| waive certain transfer restrictions in connection with, and
| assist in the administration of, a tender offer that such holders
| proposed to commence. From August 2019 through September 2019,
| these holders commenced a tender offer to purchase shares of our
| capital stock from certain of our employee stockholders,
| including our Co-Founder and CEO, Vladimir Tenev, and Co-Founder
| and Chief Creative Officer and then-co-CEO Baiju Bhatt. An
| aggregate of 5.4 million shares of our capital stock were
| tendered pursuant to the tender offer for an aggregate purchase
| price of $67.6 million, or $12.4827 per share.
|
| > 2018 Secondary Sales
|
| > On April 3, 2018, our Co-Founder and CEO, Vladimir Tenev, our
| Co-Founder and Chief Creative Officer and then-co-CEO, Baiju
| Bhatt, our then-Chief Operating Officer, Nathan Rodland, and one
| other employee, each individually entered into common stock
| purchase agreements with certain other holders of our capital
| stock, including entities affiliated with DST Global, pursuant to
| which they sold shares of our common stock to the purchasing
| stockholders at a purchase price of $10.145 per share. In total,
| Mr. Bhatt sold 5,421,389 shares of common stock for an aggregate
| purchase price of $55.0 million; Mr. Rodland sold 295,712 shares
| of common stock for an aggregate purchase price of $3.0 million;
| and Mr. Tenev sold 5,421,389 shares of common stock for an
| aggregate purchase price of $55.0 million. As part of these
| sales, each of Mr. Bhatt and Mr. Tenev sold 739,280 shares of our
| common stock to entities affiliated with DST Global.
|
| What a joke. Founders got rich beyond imagination dumping all the
| risk on employees.
| nemothekid wrote:
| They went from 170MM in revenue in 2019 to 720MM in revenue in
| 2020. Wow will that be a temporary spike or sustained?
| mrkramer wrote:
| Temporary; meme stocks and meme cryptocoins can not last
| forever.
| paxys wrote:
| Sure but something else will come and replace them. Selling
| shovels is always a smart business move.
| bern4444 wrote:
| Alright, wsb has been waiting for this. Time to short (or buy
| puts) on Robinhood through Robinhood.
|
| Though Robinhood advanced 0 commission trading (though I think it
| was inevitable), it's a terrible platform.
| mulcahey wrote:
| I remember seeing their first public demo at LA Hacks in 2014.
| Seemed like a couple of kids right out of college. They had the
| iPhone's screen hooked up to the projector and one of their
| friends kept sending them silly text messages the whole time that
| they had to dismiss. This was before the Do Not Disturb feature
| came out.
|
| I remember wondering how it took so long for someone to make a
| half decent stock trading app for the iPhone -- all the other
| apps at the time sucked (and they largely still do). I was on
| ETrade before but signed up for the Robinhood waitlist
| immediately -- haven't left since being allowed in early 2015.
| sakekasi wrote:
| I was at that LA Hacks as well! The first one right? That was
| the highlight of the hackathon! I remember everyone really
| tripping over themselves to try to sign up
| paulpauper wrote:
| good fonts, contrasting colors, and large buttons. UI is so
| important. never underestimate it
| agumonkey wrote:
| won't name them but other big exchanges phone apps are pretty
| nifty.. you can operate lot with a thumb it was a bit surreal
|
| no advanced trading / charting / analytics but still quite
| surprising
| systemvoltage wrote:
| I think the opposite - UI of Robinhood is awful. For example,
| to see a list of orders you've placed, you gotta interact
| with a fake chat box and it takes at least 15 seconds to see
| the last order.
|
| Call me old school. TD Ameritrade and Charles Schwab has the
| best UI IMO.
| nscalf wrote:
| Robinhood is the example I use for showing that good design can
| be a company making differentiator. In many ways Robinhood is
| much worse as a trading platform, but the usability and
| simplicity of getting started is orders of magnitude above all
| other competition.
| collias wrote:
| Absolutely. Their front-end is phenomenal, even if their
| back-end is subpar.
|
| It's to the point where I use Robinhood to look at market
| info, then open my actual brokerage app to execute the trade.
| Robinhood is lightyears ahead of traditional brokerages in
| terms of UX.
| tw600040 wrote:
| Can you elaborate on why you think robin hood is better than
| etrade?
| BoysenberryPi wrote:
| Robinhood's value is all UI and UX. Every other finance app
| is in the past. Vanguard, Etrade, even ThinkOrSwim; none of
| them even come close to how easy Robinhood is to use. I also
| left Robinhood after the GME thing but man their app is so
| streamlined compared to everyone else.
| mgfist wrote:
| I use RH sometimes to look at prices and then go back to
| Etrade to make actual trades.
| mulcahey wrote:
| I'm not the most sophisticated trader but I appreciate their
| UX and simplicity, which I think is true of most of their
| user base
| rezistik wrote:
| I think the question is whether RH is sticky, they have
| good traction in growth, and I think it will be sticky. If
| enough people are doing fractional shares trading it's
| really hard to transfer out fractional shares to different
| brokers. Might actually not be possible.
| pedroma wrote:
| I did an ACATS from RH. They just sell the fractional
| shares at market price and send the cash.
| rezistik wrote:
| Right so you have to purchase your fractional shares on
| your next platform, which I guess would only amount to
| the fractions so maybe not a huge deal if you have 100.5
| of a stock you're only losing the .5, but it could add up
| if you have a really diverse portfolio.
| tmp_anon_22 wrote:
| iOS development sucks. It had a huge amount of churn this
| decade due to the transition into Swift. Documentation wasn't
| just out of date, it was in a different dimension. Every SO
| answer was a mix of incompatible versions and - what answers
| existed were best guesses from people who also had no concrete
| documentation to go off of.
|
| Your best bet was to cozy up to Apple teams or preferred Apple
| partners like Facebook and Uber, and see if the inside scoop
| could save you a few months of maddening frustration.
|
| You can see this evidenced in engineering blog posts from
| companies like Uber and Twitter, they had to hire soooo many
| people to build out their mobile app.
| caymanjim wrote:
| I know better, and I still use Robinhood. I also use Fidelity,
| but their mobile and web apps suck beyond description, and used
| to use Scottrade, who also suck. Robinhood doesn't just look
| better (although that's important); it's easier to use and
| faster; bank transfers are WAY easier; you don't have to jump
| through hoops to enable options trading (which means a lot of
| people who shouldn't trade options now do, but it's still
| better for those who want to); you can trade on deposits
| instantly instead of waiting a week for the deposit to clear;
| margin is easy to use. There are plenty of foot-guns in
| everything I said, but there's also plenty of convenience and
| utility for people who are trading carefully.
| supernintendo wrote:
| I feel like the only person who actually likes the Fidelity
| app. Sure, it's not visually attractive like Robinhood but
| the amount of information you get is far greater. Also the
| iOS app works on both my iPhone and iPad whereas Robinhood
| only renders the phone view on iPad. The app even has proper
| support for the Magic Keyboard so cursor interactions work
| the way they should on iPadOS. Fidelity definitely has a
| "boomer UX" quality about it but once you get used to it,
| it's really not that bad.
| Apocryphon wrote:
| Have you tried TD Ameritrade's Think or Swim?
| fnordfnordfnord wrote:
| ToS is pretty good. Takes some getting used to though and
| is sometimes confusing.
| adabyron wrote:
| Think or Swim is awesome if you're technical or putting a
| lot of time & geeking out into this world.
|
| Robinhood is awesome if you're new or want something much
| simpler.
|
| If I was daring, I might compare it to Linux/MS vs Apple on
| here but I don't dare because people would take that the
| wrong way.
| fnordfnordfnord wrote:
| Their app and UI are great, really great; but I closed most of
| my trades after the Gamestop fiasco and I'm not coming back. I
| kept the debit card and keep a few bucks in there, still use
| the app for quick quotes sometimes but that's about it.
| jppope wrote:
| same
| yawaworht1978 wrote:
| Ok let's see. Average funds per user in custody is 4500$. Organic
| or referred new customers 80percent is an incredibly misleading
| number. I know that in this industry lead generation, rev share
| or signup deals are very lucrative/expensive, only crypto
| exchanges and online casinos pay out more. If they are holding
| 4500 on average and and we assume 2 percent commission fees, then
| that will be 90 use life time value on average, let's not even
| calculate the acquisition costs, might well be that 80percent
| come from referrals. That will be 1.6 annual revenue before
| marketing cost, salaries, referrals, rent etc. Maybe they sell
| some customer data but what would a good stock price estimate be
| here? How many shares will be issued?
| bmmayer1 wrote:
| $1 billion in top line revenue in 2020. Wow.
| arthurcolle wrote:
| Stocks only go up
| fullshark wrote:
| ~70% was transactions and ~20% was interest. For comparison
| about 60% of Etrade's revenue is interest and 30% is fees +
| commissions.
|
| Either Robinhood has found a smarter business model re: selling
| order flow or they are making a killing on crypto fees. The
| commission business model is dead for good I think.
|
| https://www.nasdaq.com/articles/net-interest-revenue-will-fo...
| fnordfnordfnord wrote:
| >or they are making a killing on crypto fees.
|
| They don't charge commissions to trade crypto. Not sure where
| they're skimming the money but the terrible order fills you
| get there gives me an idea.
| ralph84 wrote:
| There are no regulations on execution quality for crypto.
| RH treats crypto as forex and quotes their customers a huge
| markup on the bid/ask spread (think airport forex booth
| type spreads). RH customers can only trade with RH and
| their crappy spreads. RH won't match customer crypto orders
| against each other.
| raziel2701 wrote:
| In the S-1 they write: "For the three months ended March
| 31, 2021, 17% of our total revenue was derived from
| transaction-based revenues earned from cryptocurrency
| transactions, compared to 4% for the three months year
| ended December 31, 2020."
|
| So they do charge something on crypto transactions?
| edoceo wrote:
| Front-running?
| gruez wrote:
| No need. It's just like those "commission free" currency
| exchange places you see at airports and tourist areas.
| There might not be a commission, but the spread is
| several percent, and they make all their profit off that.
| fnordfnordfnord wrote:
| A rose by any other name...
| paulpauper wrote:
| So much for that media narrative of rh being hurt by bad press
| about gamestop. Rh is still hugely popular
| nerfhammer wrote:
| My guess is all the media attention actually got them more
| signups
| conception wrote:
| Well, said bad press was in 2021 so any effects have yet to
| be seen.
| verdverm wrote:
| Will it be the PR or that people were actively trading
| while lockdown was on? Anecdotally, I know several people
| who were active on RH until they went back to work
| ac29 wrote:
| Certainly puts that $70M SEC fine in perspective - that's not a
| trivial amount.
| swarnie_ wrote:
| I imagine a large portion of the internet newly flushed with
| GME/AMC/WISH cash are lining up to short this in to the ground.
|
| I'll personably be buying everything i can get my hands on three
| months after launch
| FinanceAnon wrote:
| Would be hilarious if they ended up on the other end of a short
| squeeze.
| slo_news wrote:
| "For the three months ended March 31, 2021, 17% of our total
| revenue was derived from transaction-based revenues earned from
| cryptocurrency transactions, compared to 4% for the three months
| year ended December 31, 2020."
|
| That's some pretty crazy growth! Granted, that was a unique time
| in crypto. But I'm sure history will repeat. Will be interesting
| to see how RH's crypto strategy develops based on this. Crypto
| essentially brings the payment for order flow in-house and makes
| RH the market maker for doge, BTC, etc. So maybe RH will just
| start to look more like Coinbase!
| granzymes wrote:
| Headline financials: FY Ended December 31, in
| millions except percentage and assets per user
| | 2019 | 2020 | YoY
| ---------------|--------|--------|------- revenue |
| $278 | $959 | 245% op ex | $384 | $945
| | 146% net income | $(107) | $7 | (107)%
| assets held | 14,136 | 62,979 | 346% monthly users |
| 4.3 | 11.7 | 172% assets per user| 3,287 | 5,382 |
| 64%
| raziel2701 wrote:
| Also the cash - liabilities calculus not looking good.
|
| $8.8B in cash - $7.7B in liabilties = - $1.1 billion
|
| I'll pass.
| bern4444 wrote:
| Exactly, imagine if they're margin is margin called. They
| don't have enough assets to handle abnormal (but not
| unlikely) swings. So they're forced to disallow types of
| trading.
|
| I'm surprised capital requirements aren't in place
| mrkramer wrote:
| Yup....Their business depends on dogecoin I mean good luck
| with that.
| alliao wrote:
| it is slightly worrying that society allows something so big
| that's so... fragile? it's like a disaster waiting to happen
| and bound to cause massive amounts of damage...
| rburhum wrote:
| I understand that many give Robinhood crap because it is not
| "sophisticated enough" or because of the Gamestop fiasco.
| Although many startups like to claim that they are "democratizing
| [x]", I honestly believe they did it. I have many friends that
| never traded before, and after they got their Robinhood account
| they feel comfortable enough to do it often. Even myself, who
| used to only trade a couple of times a year, started with $300 in
| my Robinhood account a few years back. Now I have at least ~60k
| that I rotate around in my Robinhood account on a daily/weekly
| basis. Yes there are other services that I now use or other apps
| that seems better, but for all intents and purposes, Robinhood
| did "democratize" trading for me.
| elliekelly wrote:
| > Even myself, who used to only trade a couple of times a year,
| started with $300 in my Robinhood account a few years back. Now
| I have at least ~60k that I rotate around in my Robinhood
| account on a daily/weekly basis.
|
| I don't think trading more stocks and trading them more
| frequently is a "better" or even "democratized" outcome. For
| the vast majority of people trading more shares more often is
| an objectively terrible investment strategy.
| waych wrote:
| While "day trading is an objectively terrible investment
| strategy" for most, having more people in the market and
| market participants being more fluid in their investments
| than not, is strictly _more efficient_ than a market with
| less participants who act more illiquid in their positions.
| wolverine876 wrote:
| Imagine a market of 1,000 people. If we add 5,000 who
| significantly under- or overvalue, or make other errors,
| the good being traded, is that more efficient?
|
| In terms of economic efficiency, if that's what we mean, I
| would guess not: It causes the misallocation of capital to
| worse investments. Was the Gamestop market economically
| efficient?
| waych wrote:
| You are making the assumption that the first 1000 people
| somehow had a better way to value the assets being
| trading than the next group that joins the trade. This is
| a fallacy as the market sets the prices on its own.
|
| No by efficiency I mean the spread and incorporation of
| more information relating to the underlying asset, making
| it more closely match their fair value, and the resulting
| tightening of the spread and reduced volatility overall.
| See Efficient Market Hypothesis.
|
| It is also worth noting that it is this same hypothesis
| that backs the "index funds are better than stock
| picking" argument.
| elliekelly wrote:
| Are the new traders introducing more information to the
| market? Or are they introducing noise?
| adabyron wrote:
| People complain about unfair advantages regular "retail" people
| have but Robinhood has made access to stocks & options a lot
| easier. They've made it easy to get the cheapest rates possible
| on portfolio backed loans. They're starting to try & give some
| type of IPO access, although I can't comment on the value of
| that. If they start to offer IRAs & other tax advantaged
| accounts, plus a way for non accredited investors to invest
| early in Start-Ups they would have hit a grand slam in my
| opinion.
|
| Obviously while I see the above as a lot of great things, in
| the wrong hands people can do a ton of damage to themselves
| with margin, options or trading risky stocks. Robinhood, at the
| demands of critics, has been improving their information in
| their UI to help people better understand the risks. And yes,
| their bash the button to get early crypto access shall never be
| forgotten & always be a tarnish.
|
| The Robinhood app is far better than anyone else out there for
| your average investor. ThinkorSwim is the only thing even close
| & it's far to complicated for most. Otherwise Robinhood is
| faster, cheaper, better info & overall better user experience.
| The other companies have all been incredibly behind times, as
| financial companies are known for.
|
| Side Rant: Robinhood wasn't the only one to run into GameStop
| issues. There are some people who believe the whole GME debacle
| was very close to having huge negative implications on the
| entire market that were going to hurt everyone, whether in the
| trade or not.
| m00x wrote:
| Retail investors could still invest using regular tools. Most
| banks have portals where you can buy/sell, but most of them
| safeguard against margin bets and they have much less sketchy
| practices.
|
| Robinhood made it fancy and hid the complexities of investing
| so they could turn investing into a gambling platform.
| rsync wrote:
| "I have many friends that never traded before, and after they
| got their Robinhood account they feel comfortable enough to do
| it often."
|
| This reminds me of the lamentations I sometimes hear about the
| "unbanked" or the "underbanked".
|
| I always think: "lucky them ..."
| human wrote:
| Robinhood "democratized" gambling on the stock market.
| mhh__ wrote:
| Coming from a country where gambling is like a plague (Most
| UK high streets are identical, gambling shops are
| everywhere), is that any worse than gambling elsewhere? Your
| chances of lucking into some money seem better there than on
| sports.
| beambot wrote:
| Your use of the word "trade" versus "invest" perfect
| encapsulates the nuance of Robinhood.
|
| What _exactly_ is Robinhood 's product? It's certainly not the
| newly-minted traders -- their orders are "free". If you follow
| the money, it looks like it's mostly Pay For Order Flow (PFOF).
| I wonder why giant market-making hedge funds would pay for that
| order flow... Another tech faustian bargain.
| gruez wrote:
| > I wonder why giant market-making hedge funds would pay for
| that order flow... Another tech faustian bargain.
|
| It really isn't. They're making money off the spread (eg.
| $105.01 bid vs $105.02 ask), which exists regardless of PFOF
| (regulation NMS mandates that the price be better or equal to
| NBBO). The reason why they want retail flow is that it's
| mostly "uninformed" and they're less likely to get run over.
|
| matt levine explains this in detail: https://www.bloomberg.co
| m/opinion/articles/2021-01-29/reddit...
|
| >I like to tell a fairly textbook version of that story.
| Market makers stand ready to buy or sell stock from or to
| customers; they try to buy for a bit less than they sell at,
| and pocket the spread. If you go out into the market and say
| "hey I'll buy anyone's stock for $10," and a really smart
| hedge fund comes to you and sells you stock for $10, that's
| probably bad. You've probably made a mistake. The hedge fund
| is selling you the stock for $10 because it knows it's worth
| $8. This is called "adverse selection."
|
| >More subtly, if a really big mutual fund comes to you and
| sells you stock for $10, that also may be bad. The mutual
| fund is probably selling lots of stock, because it's so big;
| it sells you a little, then sells a little more, then a
| little more, until it pushes the price down to $8. The mutual
| fund isn't necessarily smart, but by virtue of being big and
| doing big trades, it moves the price; if you are on the other
| side of its trades, you get run over. This is also a kind of
| adverse selection: You buy at $10 and are stuck selling at
| $8. Part of the spread that market makers earn in public
| markets--the difference between their buying and selling
| prices--compensates them for adverse selection, the risk of
| being run over by a counterparty who knows something they
| don't.
|
| >Market makers, the textbook theory goes, would much rather
| trade with retail orders. Retail investors generally don't
| know much, so if you buy stock from them you're probably not
| making a mistake. And retail orders are generally small and
| uncorrelated: One investor buys a little, another comes along
| a moment later and sells a little, it's all pretty random,
| and you're not facing an avalanche of steady sell orders that
| push the price down. Trading with retail is so nice that
| market makers--wholesalers--will both give retail orders a
| tighter spread (pay more to buy their stock, charge less to
| sell stock to them) and pay their broker for the privilege of
| doing it.
| kolbe wrote:
| Former CBOE market maker here. You and the person you're
| responding to both have valid arguments. The problem is you
| are choosing only to present the ones that make this
| situation look good, and he's only insinuating the bad
| ones.
|
| The fact is that this "spread" you speak of is a much more
| theoretical concept than Matt Levine understands. There is
| ample liquidity between the bid-ask in 99.9% of markets,
| and by selling order flow to someone who will internalize
| it at the worst legal price possible, they are
| intentionally failing to fill an order at the best possible
| price.
|
| RobinHood also features various dark patterns that are
| designed to remove money from the pockets of their users
| and put it into their own pockets. Off the top of my head,
| I can list the following:
|
| (a) Very difficult access to bis-ask spread information
| across multiple options. This keeps users ignorant of the
| fact that some options may be better priced than others,
| and gives market makers more opportunity to make more than
| a fair market spread on the transaction.
|
| (b) Forced close-outs for reasons that no other legitimate
| brokerages use. Even worse than being ill-infomed about
| what to trade is to have all of your agency removed. It's
| situations like these where the gap between a fair market
| edge and the edge that market makers take becomes
| offensive.
|
| (c) Disallowing option exercise before expiration. There
| are many situations where an option owner should exercise
| his option prior to expiry. Not only does RobinHood keep
| its users ignorant of this fact, they actually don't even
| allow their users to do it. In some circumstances, this can
| give market makers a massive arbitrage opportunity.
|
| While you are right that one thing that makes RH flow more
| valuable is the smaller average account money size, this is
| actually far less of an issue than just the average account
| financial IQ size. Citadel loves trading with pensions just
| as much as RH users (i.e. similar financial IQ, but far
| different sizes). It's just that the type of trading that
| happens with each is a little different.
|
| Add in the aforementioned reasons for keeping them not only
| ignorant, but handcuffed, then the more market makers will
| pay RH for access.
| gruez wrote:
| >and by selling order flow to someone who will
| internalize it at the worst legal price possible, they
| are intentionally failing to fill an order at the best
| possible price.
|
| AFAIK they have duty of best execution, so they're
| _supposed_ get the best price irrespective of PFOF.
| Obviously this conflicts with their own incentives, but
| that 's what the laws are for.
|
| >RobinHood also features various dark patterns that are
| designed to remove money from the pockets of their users
| and put it into their own pockets. Off the top of my
| head, I can list the following:
|
| I'm not a user so I didn't know any of these. Thanks for
| bringing these up. _Informed_ complaints like these are
| far better than the "they're front running you!"
| complaints that people seem to repeat endlessly.
| kolbe wrote:
| > AFAIK they have duty of best execution, so they're
| supposed get the best price irrespective of PFOF.
| Obviously this conflicts with their own incentives, but
| that's what the laws are for.
|
| There is a duty of best execution. I honestly don't even
| know if its a crime or a licensing requirement or what.
| Reg NMS seemed to have obviated it, and judging by the
| failures to execute properly on the parts of major banks
| (e.g. my family had a major bank execute a bond trade for
| them that another bond trader friend of mine said was 10%
| below a competitive market price. That is, they paid 90,
| when you could have paid 100 in the competitive market),
| my impression is this law is totally unenforced.
|
| Also, it looks like no one will be able to see my
| criticisms because YC wants to protect their investment
| going into the IPO by crushing this comment thread
| beambot wrote:
| What you are describing is market makers, not Robinhood.
| Quoting directly from the S-1:
|
| > Our PFOF and Transaction Rebate arrangements with market
| makers are a matter of practice and business understanding
| and not documented under binding contracts. For the three
| months ended March 31, 2021, 59% of our total revenues came
| from four market makers.
|
| So 59% of Robinhood's revenue comes from selling PFOF to
| market makers. I promise you that there isn't some magic
| altruism on the part of market makers buying the PFOF and
| then routing 40-60% of trades off-exchange. If it was
| simple matter of profiting off bid-ask spread: Force those
| orders through the exchanges instead of through dark pools.
|
| This is precisely why there's an entire section dedicated
| to PFOF regulatory risk in their S-1. It's increasingly a
| rigged game and rightfully deserves deep Congressional
| intervention.
| gruez wrote:
| > What you are describing is market makers, not
| Robinhood. Quoting directly from the S-1:
|
| Did i claim that robinhood is a market maker and/or
| participates in market making? I simply explained how
| market makers are making money in a non-nefarious way and
| why they might pay robinhood for order flow.
|
| > I promise you that there isn't some magic altruism on
| the part of market makers
|
| As explained in my prior comment there's no altruism
| involved. Retail orders are valuable because they're
| uninformed/non-toxic
|
| >and then routing 40-60% of trades off-exchange. If it
| was simple matter of profiting off bid-ask spread: Force
| those orders through the exchanges instead of through
| dark pools.
|
| Why bring in dark pools and "off-exchange"? The whole
| point of buying orderflow is to execute it yourself
| rather than letting anyone execute them.
| arcturus17 wrote:
| I really don't understand this "democratizing" thing.
|
| In Spain, banks have allowed to trade on all kinds of assets
| for ages. Some with low fees. If you wanted to buy a certain
| asset you could do so in like three clicks.
|
| In the US I know as a fact that some banks like Charles Schwab
| have also made retail investing accessible for ages...
|
| Robin Hood has "democratized" trading in the sense of
| aggressively expanding it through marketing, maybe a cool UX (I
| wouldn't know), but otherwise I don't see how it has innovated
| significantly in the area of retail investing.
|
| Like a sibling commenter is saying it has also popularized day-
| trading more than anything. The math about day-trading is
| unequivocal and it may very well be that popularizing this is a
| net loss for society, or at the very least (yet another?)
| mechanism for transferring wealth from the middle class to
| sophisticated elites (I mean, this wouldn't be a loss if you
| believe it's stricly a zero-sum effect, and that wealth is just
| as well in either set of hands)
|
| To be clear, I may have moral qualms with RH and the
| popularization of day-trading, but I do believe in free market
| economics and I think it should exist - I can only hope that in
| time regular folk become educated about investing and that my
| transfer theory doesn't come to fruition.
|
| I'm all open for counterpoints on both my claims that it hasn't
| done all that much for democratizing retail investing and that
| day-trading for the masses may be a bad proposition.
| dilyevsky wrote:
| CS had like $9 fee per trade before they felt the heat from
| RH. Which btw was fine by me since it was small potatoes if
| you just casually invest and hold for a year or longer. What
| they really democratized is incessant day-trading, otm calls
| on dogshit stocks etc. basically a casino pretending to be a
| brokerage
| jetru wrote:
| It's like, you could upload videos to YouTube all you wanted
| all the time, but TikTok made it more accessible.
| cyral wrote:
| > In the US I know as a fact that some banks like Charles
| Schwab have also made retail investing accessible for ages...
|
| I was helping a friend open an IRA with Schwab the other day.
| After you sign up, it just plops you into their dashboard
| with no instructions at all. Search function was useless,
| actually took tons of clicks for me to figure out how to fund
| the IRA and invest it in an index fund (for example, the list
| of target date funds isn't found anywhere on their menus, I
| had to google and use their secondary fund site to find the
| symbol).
|
| Basically they sure didn't make it easy or accessible for new
| users, where as with Robinhood it is immediately obvious how
| it works (I know Robinhood doesn't have IRAs but the patterns
| for regular investing with other brokers are similar levels
| of clunkiness)
| JoelSanchez wrote:
| Just curious, what banks are those? Renta 4 is mainly focused
| on funds, and traditional banks like, say, BBVA, don't have
| any stock trading features in their apps / websites, as far
| as I know?
|
| I'm using Degiro for stocks.
| paxys wrote:
| Yeah, whatever you say about Robinhood, the fact that they came
| in from nothing and massively disrupted a trillion+ dollar
| industry is undeniable. Mainstream brokers used to charge $10+
| for a single trade, and the fees today are all down to 0. They
| are also starting to build half-decent apps.
| lquist wrote:
| Democratizing investing is akin to democratizing gun ownership.
| Yes, more people have access to the technology/service/etc. but
| is it really desirable?
| cwkoss wrote:
| If they removed all of the dark patterns from their UI, I think
| they could be a real social good.
| [deleted]
| matt_s wrote:
| I have read anecdotes that their ToS is geared towards them
| owning the securities because they pool purchases. Their
| business model is the brokers are the ones that actually pay
| them and potentially hold the securities.
|
| Also, from their recent "Systemic Supervisory Failures" [0]:
|
| > Between 2018 and late 2020, Robinhood experienced a series of
| outages and critical systems failures. The most serious outage
| occurred on March 2 and 3, 2020, when Robinhood's website and
| mobile applications shut down, preventing Robinhood's customers
| from accessing their accounts during a time of historic market
| volatility.
|
| In the event of a large market downturn could you actually
| transfer that 60k elsewhere or for that matter, even access the
| platform to exit positions?
|
| Payment for order flow means you are likely in line behind
| which ever Wall St firm is paying for that order flow. Yes that
| is illegal for them to do (called front running I believe) but
| the fines they pay are usually tiny compared to the revenue.
|
| [0] https://www.finra.org/media-
| center/newsreleases/2021/finra-o...
| atombender wrote:
| Robinhood is a broker-dealer, and is subject to the same
| regulations as everyone else. _All_ the major brokerages hold
| securities under their name ( "in street name") on behalf of
| the customer. You still retain legal ownership, even for
| fractional shares. As far as I know, Robinhood has its own
| clearing house subsidiary, Robinhood Securities, that handles
| the share bookkeeping, including the fractional share
| inventory you're talking about.
| ditonal wrote:
| Index funds democratized investing. Robinhood "democratized"
| the worst part of investing and exposed unsophisticated
| investors to the instruments they are most likely to
| underperform on. Individual stock picking is probably worse
| than indexes but fine, however the incentive to day trade or
| trade complex derivatives is almost certainly going to hurt
| people far more often than a Vanguard account. It's not a
| coincidence Robinhood has been directly linked to teen suicide
| and Vlad gave the proverbial lip service.
|
| In any case, it really doesn't matter. It's awful at order
| execution, so you get worst prices on things. This was proven
| but SEC just gave slap on wrist.
|
| Its an extremely immature platform and has outages at the worst
| times.
|
| It's app is simple but missing key info compared to
| competitors.
|
| Finally, the GameStop fiasco was unforgivable and only a naive
| fool would accept the explanation given. Citadel is the
| MAJORITY of Robinhood revenue and was opposite that trade. The
| stock market has existed for over a century with online trading
| for decades, including many volatile stocks, and apologists
| can't name a single other example of one way trade
| restrictions. It didn't happen during the Volkswagen short
| squeeze.
|
| Despite that, apologists act like the clearing house
| explanation is stone cold fact. Source? Not a single
| investigation other than the word of Robinhood CEO, who
| contradicted himself multiple times explaining it. It was the
| fraud of the century and only people with little understanding
| of finance bought the explanation.
| WYepQ4dNnG wrote:
| > Index funds democratized investing. Robinhood
| "democratized" the worst part of investing and exposed
| unsophisticated investors
|
| On the spot! Robinhood has made it so easy to trade that I
| have seen many people trading from their mobile while having
| a coffee or commuting! I would really like to see all these
| "traders" in 5/10 years ... if it is true that 80% of day
| traders loose money .. I bet tons of improvised traders will
| learn a very expensive lesson.
|
| I don't do trading, I simply don't have time to fully look
| into companies balance sheets etc. I buy index/mutual funds ,
| I might have missed the meme stocks but I am happy with my
| steady growing investments, compounding effect works great!
| ses1984 wrote:
| Everyone feels like a genius in a bull market. A pile of
| bread mold could make money in the stock market now. It
| won't last forever though.
| jackson1442 wrote:
| I definitely fell into this trap, but fortunately came out
| ahead. After switching to Vanguard I feel more comfortable
| in my investments since I don't feel the time-pressure to
| check performance etc. RH feels too much like a social
| network where it's trying to push you to buy and sell every
| single day while more traditional brokerages follow a "set
| it and forget it" path.
| nightski wrote:
| I trade at the risk of lower overall returns for the chance
| of very high returns.
|
| Index funds are for my retirement account, it's fun to have
| a brokerage account and trade with it as a hobby. It's been
| very profitable so far but I don't expect that to continue.
|
| I'd imagine day trading has a much higher return than
| buying lottery tickets or gambling at a casino for example.
| teawrecks wrote:
| IMO if there ever existed an "American Dream" it was: the
| ability for an individual to work hard, assume a high amount
| of risk, get lucky, and reap the rewards. There was a time
| when that was possible in the US, but it hasn't been that way
| for a long time.
|
| It seems that in the 1900s the American Dream shifted to
| mean: get a job, buy a house, have kids, don't take risks,
| trust in the system and the system will support you.
|
| Now in 2021, it's more like: get a job to ensure you don't go
| bankrupt from stupid high healthcare expenses, your employer
| will keep all the profits and shift all the risks onto you,
| and if you're moderately lucky and live in the right place,
| you won't be homeless.
|
| I don't know how I feel about publicly traded stocks or the
| stock market, but I can't help but feel like "index funds
| democratized investing" is like saying "the 9 to 5 job
| democratized the American Dream".
| yreg wrote:
| >It was the fraud of the century and only people with little
| understanding of finance bought the explanation
|
| A CFO of a multimilion dollar company gave me the same
| explanation independently before Robinhood gave any
| statement.
| 8note wrote:
| What do you mean when you say "democratized investing" ?
|
| That people can get benefits from the stock markets? Or that
| investment/economic decisions van be made democratically?
|
| Index funds rely on the the folks making the index to
| determine which stocks get bought -- who's on the s&P 500 is
| not a democratic process
| [deleted]
| [deleted]
| starguide77 wrote:
| When you say "It's awful at order execution, so you get worst
| prices on things." What does "worst price" represent? How do
| you get a "Worst price" than anywhere else?
| gruez wrote:
| >Source? Not a single investigation other than the word of
| Robinhood CEO
|
| I'd welcome an investigation, but based on the rest of your
| comment ("apologists", "only a naive fool would accept the
| explanation given") my guess is that your mind is already
| made up.
| meowface wrote:
| Not to mention "it was the fraud of the century".
| tptacek wrote:
| The problem with the conspiracy theory about Citadel forcing
| Robinhood to halt GME is that plenty of providers for whom
| Citadel wasn't most of their revenue also halted GME. There
| are other reasons this conspiracy is silly, but that fact
| seems to kill it pretty dead.
|
| I don't like Robinhood and don't feel any need to apologize
| for it; I think they're predatory. But this isn't why.
|
| "Fraud of the century" is pretty funny, though. Kudos.
| adabyron wrote:
| M1, E-Trade, Trading 212, Interactive Brokers, TD
| Ameritrade/Schwab and WeBull halted options as well.[1] There
| are a few more I'm missing.
|
| I wasn't happy about it but I don't blame them. As much as
| people were talking about over 100% of GME shorted, I can't
| imagine how much margin on top of margin people were trading
| while there options had yet to be settled. If anything the
| issue should be how long it takes a trade to settle.
|
| [1]https://markets.businessinsider.com/news/stocks/robinhood-
| we...
| Judgmentality wrote:
| > I wasn't happy about it but I don't blame them.
|
| What they did was illegal, so why not blame them? Robinhood
| is being investigated for it. Why not blame everyone that's
| guilty?
|
| https://www.vice.com/en/article/wx5p8z/feds-seized-
| robinhood...
| yreg wrote:
| If I went for this positive spin, I'd talk about democratising
| investing, not democratising trading.
|
| Democratising trading is not inherently good, similar to
| democratising gambling.
| onlyrealcuzzo wrote:
| If people want to gamble (or do drugs), why should we be
| nannies and stop them?
|
| I get the desire to stop commercial banks from gambling YOUR
| savings. But why shouldn't you be able to gamble your own
| savings if you want to?
| [deleted]
| 2OEH8eoCRo0 wrote:
| Huge societal costs that we all bear?
| Consultant32452 wrote:
| A few randos going bankrupt is a minor societal cost at
| worst. The big societal costs are when the big boys get
| bailed out, usually by deflating all of our currency.
| mym1990 wrote:
| It depends on how much you care for the person doing the
| gambling or drugs and at which stage its at. Being a nanny
| to everyone doing something 'bad' would be a 24/7 affair.
|
| On a large scale, eventually lots of people will be hurt.
| Everyone thought they were having lots of fun in 2007, and
| then people started jumping out of buildings. Those people
| had family and friends. Many of the young people in the
| market right now have never seen or gone through that, and
| if they keep preaching 'stocks only go up' while trading on
| 40x margin, they will eventually find out that stonks
| sometimes go down.
| yreg wrote:
| I'm not saying we should be stopping them. But I also don't
| consider democratising and enabling gambling or taking
| drugs heroic.
|
| Similarly, I'm all for drinking alcohol yet wouldn't cheer
| for an innovation that would make people drink more.
|
| ----
|
| That being said, I think that RH (and many other platforms)
| do in fact democratise investing (and that's great).
| wanderingmind wrote:
| Do you consider legalising drugs as good for the society?
| Do you think drugs won't be advertised like how
| cigarettes and alcohol is being advertised. This is the
| price to live in a free society. You allow people to make
| their mistakes and live by its consequences.
| tonfa wrote:
| > Do you think drugs won't be advertised like how
| cigarettes and alcohol is being advertised
|
| Many countries ban advertizing for cigarettes. So while
| it's not banned the cost on society and public health is
| large enough that it's worth restricting advertizing.
|
| I realize that likely seems totally weird for US folks,
| but that's really not weird at all in Europe. Same as
| regulating advertizing targeting kids, etc.
| NegativeLatency wrote:
| There's a difference between stopping them and stopping
| exploitative companies who want to profit off of them.
| mdoms wrote:
| > I understand that many give Robinhood crap because it is not
| "sophisticated enough"
|
| I don't recall ever seeing anyone criticise RH for this. It's
| RH's entire model to be unsophisticated and "democratise"
| trading.
|
| > because of the Gamestop fiasco
|
| Anyone who doesn't criticise RH for this has rocks in their
| heads. Anyone who believes RH's official explanation lacks
| basic critical thinking skills.
| [deleted]
| [deleted]
| gberger wrote:
| The Chief Legal Officer, Daniel Gallagher, made $30M this year.
| It breaks down into $257k cash, $4.2M bonus and $25.5M in stocks
| and options. This is a far larger amount than any other
| executive.
|
| In 2011-2015, Daniel Gallagher was 1 of 5 Commissioners of the
| SEC (Securities and Exchange _Commission_), the highest role of
| the SEC, appointed by the US President.
|
| He was hired by Robinhood in May 2020, and his previous job was
| at WilmerHale, a firm specializing in defending other firms
| against the SEC.
|
| This guy must be worth his weight in gold in avoiding regulatory
| fines for Robinhood.
| oliv__ wrote:
| Talk about a revolving door...
| swarnie_ wrote:
| > In 2011-2015, Daniel Gallagher was 1 of 5 Commissioners of
| the SEC
|
| > his previous job was at WilmerHale, a firm specializing in
| defending other firms against the SEC.
|
| How is that situation even remotely legal?
| s1artibartfast wrote:
| Why wouldn't it be as long they follow the law in both jobs?
| It is like defense attorney becoming a prosecutor or an IRS
| employee becoming a tax advisor.
|
| The best person to give advice on a subject are those who
| have experience on both sides.
| bern4444 wrote:
| Its not a good idea to allow heads of massive institutions
| to just hop around right after their tenure is over.
|
| For one, it creates a negative incentive for the regulatory
| roles. Now people will seek to be head of the SEC just so
| they can score a specific job after. Incentives are
| misaligned.
|
| Lots of private sector companies (especially law firms)
| include non-compete clauses for similar reasons. They want
| to prevent their former employees from leveraging their
| insider information against them.
|
| An IRS employee becoming a tax advisor is one thing. The
| head (and more broadly executive level personnel) of the
| IRS becoming the head of accounting of a major firm is
| another.
| s1artibartfast wrote:
| >For one, it creates a negative incentive for the
| regulatory roles. Now people will seek to be head of the
| SEC just so they can score a specific job after.
| Incentives are misaligned.
|
| I just don't see the misalignment in incentives. Everyone
| is thinking about their compensation next job, and it is
| only a problem if being bad at your current job somehow
| makes you more attractive to your next employer.
|
| Unlike the private sector, there shouldn't be any insider
| information to protect. The SEC should be transparent
| about the law.
| raziel2701 wrote:
| So the Big Short was spot on when it showed the SEC lady using
| that position to leverage her way into a job in the sector
| she's supposed to regulate. It makes sense an SEC regulator
| knows all the ins and outs and would be the best person capable
| of finding and exploiting loopholes.
| kolbe wrote:
| It also makes sense as a quid pro quo. But we can only
| speculate either way.
| DSingularity wrote:
| How do you value the stock options of a company that hasn't had
| its IPO?
| jjice wrote:
| Maybe off of current worth estimated after sale of shares to
| earlier investors? I'm not completely sure though.
| wfleming wrote:
| Probably using the same fair market value that pre-IPO
| startups calculate to assess your tax liability when you
| exercise options.
| mdoms wrote:
| Same way you do after an IPO. Based on the sale price of the
| stock.
| bhahn wrote:
| You generally use 409a valuations, which increase in
| regularity and accuracy as the company matures (ie. gets
| bigger and closer to an actual IPO).
| bern4444 wrote:
| Lots of ways to value a company. Once you have the value of
| the entire company, the price per share just depends on the
| number of shares. Options are then calculated based on a
| formula using the price per share as one input.
|
| You can value a company by comparing it to its peers (this is
| like company Y which has similar users, growth potential etc)
|
| You can value a company by only caring about its assets and
| liabilities.
|
| Private shares of a company can exist and be traded, another
| market based valuation just with fewer data points that are
| private and not publicly shared.
|
| And plenty more ways. Finance is really all about answering
| this question, how much is something worth and then creating
| mechanisms to trade that value in different ways.
| edoceo wrote:
| Hmm. Vice says the CEO (Vlad) had his phone seized - not for this
| thing but for the meme stock mess. Seems like a very big deal.
|
| https://www.vice.com/en/article/wx5p8z/feds-seized-robinhood...
| ZoomerCretin wrote:
| I was called a conspiracy theorist only yesterday for claiming
| there was anything wrong with the restrictions. I'm glad to
| know numerous federal agencies share my views.
| tester756 wrote:
| I always wonder how many hours goes into creating & reviewing
| this big ass document
|
| also how careful you have to be to get this right
| rfd4sgmk8u wrote:
| buy buy buy. Bullish! Opinion:
|
| * RH will drag the industry to T+0 settlement, thus breaking wall
| street shenanigans with 100%+ short selling. Inevitable to see
| the merging of on-chain settlement with traditional stonks.
|
| * RH has the largest amount of Dogecoin AUM globally (8.7B $USD
| equiv)
|
| * RH has a lot of bitcoin, ether and other coins AUM.
|
| * RH will eventually be the biggest broker in the US (world)?
|
| * RH encourages dollar cost averaging and investing over time.
|
| * RH has lots of first time investors (18-24), who over time will
| grow to be big investors
| fnord77 wrote:
| the WSB crowd despises RH now
| pavlov wrote:
| _> " lots of first time investors (18-24), who over time will
| grow to be big investors"_
|
| Or will be burned by the next prolonged downturn and exit the
| market permanently.
| toomuchtodo wrote:
| Absolutely. Sofi is the smart play there vs RH. Getting HNW
| folks onboard with student loan and HCOL property mortgages,
| and then cross selling them deposit accounts and investing
| access. "Young Money" Fidelity or Schwab.
|
| (not investing advice)
| rfd4sgmk8u wrote:
| Getting young people to get into debt is a very different
| thing than getting them to build assets. RH gives (small)
| margin loans from trading, not (large) student loans for
| marginally useful university courses.
| jimbob45 wrote:
| "There is a famous story, we don't know if it's true, about
| how in the late summer of 1929, a shoe-shine boy gave Joe
| Kennedy stock tips, and Kennedy, being a wise old investor,
| thought, "If shoe shine boys are giving stock tips, then it's
| time to get out of the market."
|
| Seems like I'm getting a lot of advice about the market from
| people with less knowledge about the market than shoe shine
| boys. My mom and my sister are invested in Dogecoin and
| neither can explain what a cryptocurrency is or even what the
| doge meme was to begin with. Seems like the next prolonged
| downturn is right around the corner.
| danpattn wrote:
| A few months ago I was at a car dealership filing out
| paperwork on a new car. The sales guy asked me what I did
| for work. I told him I was in finance. He immediately
| perked up and asked "Are you into crypto? We all trade it
| here."
|
| Turns out the whole dealership, or at least most of the
| employees, traded crypto as a hobby. I asked a few
| questions, mainly about Proof of Work, and the salesman had
| no idea what that was. He was completely ignorant of how
| crypto worked.
|
| The most common feature of assets bubbles is that they draw
| in people who would normally never engage in risky
| financial speculation. People early to the party get rich
| and that draws in everyone else. Its hard to stay out of
| the market when your neighbor has short-term gains larger
| than your salary.
|
| In the tulip bubble, everyone was a botanist. In the tech
| bubble, everyone was an equity trader. In the housing
| bubble, everyone was flipping houses or getting their real
| estate license. Now everyone is a crypto trader. Regardless
| of how useful crypto will be in the future, there is only
| one way this party ends. Pumping trillions of dollars into
| the economy can delay the pain, but the pain seems
| inevitable at this point.
| hef19898 wrote:
| Well, it was a shoe shine boy on wall street. So,
| especially back tue day, he should have been quite well
| informed!
| rfd4sgmk8u wrote:
| Yes, this apocryphal story sucks. Why wouldn't a shoe
| shine boy (or an uber driver -- for contemporary
| equivalence) not have insight from the many conversations
| he would have with informed people during their day?
|
| The casual throw away statement about business made
| during transit from a passenger might be important info.
|
| This story is just elitism, and exactly the argument Wall
| Street used against RH. "unsophisticated traders". Sorry
| Mr Banker, the market is made up of people. Claiming
| unsophistication is a projection of their own
| insecurities.
| mym1990 wrote:
| Because 2 reasons: 1. Insight is great, but I would hope
| that there is underlying understanding of the field based
| on actual study and experience(assuming the shoe shiner
| is not in finance). 2. The shoe shiner or Uber driver
| likely has no idea who they are talking to, past the
| initial impression. I would be open to a conversation
| about finance with an Uber driver, but I would probably
| not rush home to put money on it.
| hef19898 wrote:
| There are two aspects to the story. One, the shoe shine
| boy probably heard a lot of stuff. Two, he definitely had
| no business in trading stock. And two is the important
| one, once "dumb money" shows up in droves it is maybe
| time to get out.
| rfd4sgmk8u wrote:
| If that shoe shine boy (or uber driver) was alive in the
| mid to late 2010s, they would probably do trading
| business with RH. And that is why I am bullish on RH.
| sfblah wrote:
| Yeah. Hard to make predictions, but this sort of breathless
| enthusiasm seems worrisome.
| mym1990 wrote:
| Optimism > Enthusiasm > Exhilaration > Euphoria
|
| Hard to know exactly where we are right now, but certainly
| feels closer to the latter.
| drewburg wrote:
| Does this remind anyone else of the high APR (20-30%) credit
| cards offered to college students? I remember a table set up
| outside the main dining hall where they pitched getting
| started building that credit history ASAP. Now it's about
| building that portfolio ASAP and offering it to the most
| risk-tolerant age demographic. Subtly updated buying whatever
| you want on credit and worrying about whether you could
| afford it later, to buying into whatever risky position you
| want and worrying about covering it later.
| rfd4sgmk8u wrote:
| No? Because high APR cards are a trap to leech money from
| the young -- eg debt. Investing in growth assets like
| stonks is building assets. Very very different things!
| pavlov wrote:
| If you'd bought a portfolio of the 2000 class of stonks,
| most of those equities would now be worthless or acquired
| for pennies along the way.
|
| There were very few Amazons in the mix, and very many
| Palms. Even a reliable blue-chip like Cisco is still
| underwater compared to its March 2000 price.
| rfd4sgmk8u wrote:
| These people have no other option but to buy stonks and
| crypto. Their dollars lose value every year, and even a
| market downturn will look attractive vs fiat inflation. Bull
| market for the next 100 years!
| abriosi wrote:
| That's what happens when you spend a decade printing _a lot_ of
| money
|
| Value becomes diluted
| paulpauper wrote:
| this logic makes no sense. did you get this from peters
| schiff.com or something? Tech stocks surged in the 90s despite
| the fed raising rates and the treasury runing a budget surplus.
| onlyrealcuzzo wrote:
| Why can't low interest rates be good for tech stocks, but
| also all the innovation in the 90s be good for tech stocks?
|
| It appears like you're saying that only one of these can
| possibly be good for tech stocks.
|
| Why not both?
|
| How do you know tech stocks couldn't have done much better in
| the 90s under different monetary conditions (ZIRP and a
| Federal Deficit of 35% of GDP)?
| [deleted]
| paulpauper wrote:
| speculative bubbles are independent of monetary and fiscal
| policy. if someone thinks they can make 100% returns on
| their investment,what difference does 0 vs 2% interest rate
| makes? Look at the housing market in the 2000s , which
| surged despite interest rates being high.
| gruez wrote:
| >speculative bubbles are independent of monetary and
| fiscal policy
|
| If the fed pumps a few trillion dollars into the market
| and causes everything to go up in price, and bystanders
| look at that and decide to buy in, then that seems like
| that the fed's action caused the speculative bubble.
| lottin wrote:
| Actually the Fed doesn't pump dollars into the market.
| The fed buys bonds in the open market with newly created
| deposits. This alters the _composition_ of balance sheets
| of financial institutions but not the size.
| gruez wrote:
| >Actually the Fed doesn't pump dollars into the market
|
| Except when they did. Random google search:
|
| >The central bank began purchasing ETFs such as the
| iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
| and the Vanguard Intermediate-Term Corporate Bond ETF
| (VCIT) in early May last year.
|
| However, even if all they do is buy bonds, money is
| fungible so those purchases will still spill over to
| other markets as investors chase for yields. If you pump
| a few trillion dollars into the bond market it's
| unrealistic to assume that it'll stay contained to just
| the bond market.
| lottin wrote:
| If you are a bond holder, and the Fed buys $1000 worth of
| bonds from you for $1000, how is this causing everything
| to go up in price? Notice that your purchasing power is
| exactly the same before and after the purchase.
| gruez wrote:
| >If you are a bond holder, and the Fed buys $1000 worth
| of bonds from you for $1000
|
| Then what, do you just keep that $1000 in cash while
| inflation slowly eats away at it? No, you'll invest it in
| something else (eg. stocks), so now the market for that
| has an extra $1000 injected into it.
| whateveracct wrote:
| Monetary policy makes people viscerally upset for some reason
| [deleted]
| dang wrote:
| We detached this subthread from
| https://news.ycombinator.com/item?id=27702432 and marked it off
| topic.
|
| Please don't take HN threads on generic tangents.
|
| https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
|
| https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
| abriosi wrote:
| I understand your detachment
|
| For me there is a clear connection from flooding the system
| with cash and/or negative interest rates with hyper-
| financialization
|
| "Dogecoin, created as a joke, is now in an S-1 as a material
| item" -> I consider this an hyper-financialization episode
|
| The objective of the comment was to provide an simple
| explanation to a funny comment
| https://news.ycombinator.com/item?id=27702432
|
| I also consider monetary policy one of the principal factors
| for so many services created around money and cashflows
|
| Its gotten to the point that there are whole business models
| mounted around money and cashflow which bring negative value
| to the world
|
| Although I understand the detachment I don't agree, because
| now the comment looks completely offtopic and tagent. I wish
| we could delete comments in these situations
| Alkhwarizmi wrote:
| Please seek some actual legitimate information
| CPLNTN wrote:
| Dude here thinking that inflation is just a product of the
| amount of money in an economy
| jiocrag wrote:
| It's not _just_ a product of money supply, but money supply
| is certainly a factor, and we won't really know how big of a
| factor until we see if inflation persists past Covid related
| supply chain constriction.
| [deleted]
| mdoms wrote:
| The value of what? The US Dollar? Are you claiming some kind of
| runaway inflation? Because I don't know of any economists who
| agree with that.
| abriosi wrote:
| deleted
| [deleted]
| [deleted]
| jiocrag wrote:
| What were the economists saying in 2007? 1999? 1987?
| CapriciousCptl wrote:
| Per-user revenue was $109 for 2020. My goodness payment for order
| flow and cryptocurrency rebates are lucrative.
| ok2938 wrote:
| Funny that you are being played most, when you think you are in
| control.
| tofuahdude wrote:
| Robinhood's "values":
|
| Safety First, Participation Is Power, Radical Customer Focus, and
| First-Principals Thinking
|
| There's a real dissonance in the combination of Safety First and
| Participation Is Power points.
|
| Where do we draw the line between providing the ability to
| participate and safety?
|
| Many of the tools Robinhood has "democratized" for the masses are
| in fact quite financially dangerous to unsophisticated users.
| They've game-ified complex financial instruments; that doesn't
| exactly speak to safety.
| seanarnold wrote:
| Wow, I should become a Chief Legal Officer..
| timdorr wrote:
| I wonder if they will list themselves on their IPO access
| offering: https://robinhood.com/us/en/support/articles/ipo-
| access/
|
| It's going to be interesting to buy Robinhood with Robinhood...
| martin_ wrote:
| Looks like it:
|
| "RHF, one of our broker-dealer subsidiaries, is a member of the
| selling group for this offering. We expect the underwriters to
| reserve approximately 20 to 35% of the shares of our Class A
| common stock offered by this prospectus for RHF, acting as a
| selling group member, to allocate for sale to Robinhood
| customers through our IPO Access feature on our platform. Any
| such sales will be made at the same initial public offering
| price, and at the same time, as any other purchases in this
| offering, including purchases by institutions and other large
| investors, and in accordance with customary broker-dealer
| practices and procedures."
| qeternity wrote:
| It's interesting that they could be earning fees off their own
| underwriting. That would probably be an industry first.
| _fat_santa wrote:
| Intercontinental Exchange is a publicly traded company. And
| they own and operate NYSE.
| carstenhag wrote:
| Interesting, is that allowed in the US? In Germany, you can't
| buy Lang&Schwarz shares via the Lang&Schwarz trading platform
| (akin to an exchange) - doesn't matter what broker you are
| using. You always have to use Xetra or some other exchange.
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