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In typical Robinhood fashion, the stock trading app held an unconventional virtual roadshow on Saturday. Rather than having the event behind doors among investment bankers and hedge funds as usual, the event was democratized as Robinhood management answered questions from everyday investors.
Robinhood is aiming for a market valuation of up to $ 35 billion on its upcoming IPO, expected later this week. The company – which plans to trade under the ticker HOOD on the Nasdaq – is offering 55 million shares that it will attempt to sell in a range of $ 38 to $ 42 apiece.
During the live roadshow, Robinhood co-founders – CEO Vlad Tenev, Chief Creative Officer Baiju Bhatt and Chief Financial Officer Jason Warnick – introduced the company’s long-term value and juggled questions from a pool of 2,000 people about retail investment, payment for order flow, Sales diversification and more. Tenev even asked a question about his favorite planet, Venus.
Despite warnings of a possible slowdown in the retail boom, Robinhood – which expects to see 22.5 million accounts by Q2 – is optimistic about the future of individual investing.
“We believe retail investing is a trend that will continue. If you look at the data, retail growth started years before we even launched.
Robinhood was founded by Tenev and Bhatt in 2013 and offers stock, cryptocurrency and options trading, as well as cash management accounts. Executives said that more than 80% of Robinhood’s customers come through word of mouth about the company’s referral program. The company expects its assets under custody to increase to more than $ 100 billion by the second quarter.
Executives asked several questions about Robinhood’s revenue stream, which comprises approximately 75% of the money brokerage firms receive for referring client business to market makers or paying for the flow of orders. Robinhood receives an average of 2.5 cents for every $ 100 traded, according to Warnick. Tenev added that customers used the app an average of 7 times a day in 2020.
“We believe that paying for the flow of orders is a better deal for our customers than the old commission structure. It allows investors to invest smaller amounts without having to worry about commission costs, ”said Warnick.
However, Warnick said Robinhood wanted to be fully involved in the regulatory and policy discussion on PFOF. He said Robinhood and the industry could adapt if the PFOF model changed.
Meanwhile, the millennial favorite stock trading app is trying to diversify its revenue streams by launching a stock lending business, adding a debit card, upgrading Robinhood Gold, and expanding internationally.
Robinhood is also looking into adding IRA and Roth IRA accounts based on customer demand.
“We want to turn first-time investors into long-term investors,” said Tenev. He added that over 50% of Robinhood’s clients are first-time investors.
The stock trading app also reserves 20 to 35% of its IPO stock for its own customers, which Tenev says will be one of the largest retail allotments of all time.
Robinhood has no plans to pay a dividend when it comes to the public markets, which management believes is common in fast-growing companies.