Maybe. No way to know. My point is the value is the concept, not the founders. Obviously the concept wouldn't exist without the founders so the point is moot.
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Robinhood Red Flags
- Thread starter dealmaker
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Maybe. No way to know. My point is the value is the concept, not the founders. Obviously the concept wouldn't exist without the founders so the point is moot.
RH has no competitive advantage given the proliferation of zero-comms alternatives. "10 million accounts" is a lot less than it seems, given that most of those accounts carry tiny balances. Nor is the hook of "trade through your smartphone app" ever going to attract serious investors/traders who do high volume through large accounts - doubly so given the recent compliance and infrastructure blunders.
If the business doesn't blow up in the next market downturn, it's certainly worth something as a gambling app and for the small hard core of high-quality loyal clients. Probably not anywhere near where they were recently valued, though. My guess is they get bought in a few years.
If the business doesn't blow up in the next market downturn, it's certainly worth something as a gambling app and for the small hard core of high-quality loyal clients. Probably not anywhere near where they were recently valued, though. My guess is they get bought in a few years.
The business won't blow up in the next downturn. But the people in the last round of raising venture capital will lost 70%+of their investment. I say this with the caveat that somehow they monetize the concept of be "robin hood" and diversify into other areas making it a lifestyle concept.
Really, RH is a good business. They broke into an industry I thought was closed to new entrants. I want them to succeed.
I do too. Wall Street for too long has acted in oligopolistic fashion. Till this day margin rates at most brokerage are 2X+ higher than IB.I want them to succeed.
I cannot come up with one single argument for choosing Robinhood. Despite this they've now got 10 million accounts.
https://www.forbes.com/sites/donnaf...s-more-than-10-million-accounts/#4d644f0d3f81
I can.
Free trades, easy to access on a phone because millennials and gen-z hate Windows and can't afford mac, seemingly simple process of being approved for absurd margin, terrible missteps by the company (see: robinhood infinite margin glitch) allowing enterprising people way too much risk, speaking of risk virtually no such thing as risk control.
All you have to give up is good execution. Makes complete sense when your idea of trading is selling DOTM weeklies on AMD and blowing the rest of your money on whatever crypto your ear caught at the watercooler this week.
As for a lack of turning a profit that isn't a problem. The current start up strategy (now going on almost 15 years) is rush-to-acquisition whereby they sell the appearance of a profitable idea, dump the assets on some megacorp, sell out their customer base, and ride a yacht to the maldives to enjoy their new mega mansion with built in underground boat parking. I ran in a circle of fairly wealthy start up "exiters" during my early consultant years (it was virtually free money as a consultant who knows anything about tech in those times). They're all universally concerned with selling the idea of success. Once you've sold a company, the money to you flows virtually limitless, and you can spend VC capital on any stupid idea your cocaine and adderall addled brain comes up with. I can think of maybe 10-12 start ups in the last 15 years that had a product that wasn't rush-to-acquisition. Robinhood's model is simple. Offer a loss leader of free trades, change the industry (they call this 'disruption') and then ideally be acquired by a large bank for your IP. Robinhood, however, messed up. They have no IP and the Walmarts of trading just found out. I bet they'll be bankrupt and/or acquired in less than 5 years.
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Strictly my opinion their growth is meteoric but will taper off. Having 10m accounts with $500/$1000 average balance gambling Taco Bell employees won't move the revenue dial up much compared to companies with 10m $100,000+ accounts. Sooner or later data mining and order flow from RH will drop so will the revs on the top line due to their agreements with companies who pay to see their order flow. Now there is competition as every broker offers "free"
Strictly my opinion their growth is meteoric but will taper off. Having 10m accounts with $500/$1000 average balance gambling Taco Bell employees won't move the revenue dial up much compared to companies with 10m $100,000+ accounts. Sooner or later data mining and order flow from RH will drop so will the revs on the top line due to their agreements with companies who pay to see their order flow. Now there is competition as every broker offers "free"
The problem isn't the account size, its the gambling. Casinos offer free check cashing because you have to walk through the casino to get out and you're going to gamble (because you're cashing your paycheck you already statistically make very poor decisions), especially after you've had your 1-2 complimentary drinks for cashing your check. This keeps a steady stream of stupid money flowing. Robinhood doesn't have this. The 2-3 degrees of separation means when Joe the Cashier blows out on biotech weeklies he's not going to have the same degree of drive to feed his gambling habit. I would be more interested in their account turnover rate.
The problem isn't the account size, its the gambling. Casinos offer free check cashing because you have to walk through the casino to get out and you're going to gamble (because you're cashing your paycheck you already statistically make very poor decisions), especially after you've had your 1-2 complimentary drinks for cashing your check. This keeps a steady stream of stupid money flowing. Robinhood doesn't have this. The 2-3 degrees of separation means when Joe the Cashier blows out on biotech weeklies he's not going to have the same degree of drive to feed his gambling habit. I would be more interested in their account turnover rate.
Couldn't they implement a checking account where users can deposit paycheck money directly and transfer into their trading account?
Couldn't they implement a checking account where users can deposit paycheck money directly and transfer into their trading account?
They could. Plenty of retail brokers offer some kind of checking. It would be far easier if they did that, but that comes with regulatory risk so it probably isn't worth their time right now. One idea would be direct charges to a debit/credit card similar to the way pay-to-play apps work but that comes with it's own set of risks I'm sure the SEC and FINRA have specific regulations about.