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There is no way that Robinhood is worth this much money. I admire them, but $7 billion for 2 million customers is insane. I'm assuming they are targeting being
by docker_up 7y ago
There is no way that Robinhood is worth this much money. I admire them, but $7 billion for 2 million customers is insane. I'm assuming they are targeting being the "Financial Amazon" for millenials, I'm just not convinced even if they achieved it it's worth this much. Stock trading is a dying business, and after the next stock market crash or recession, they will lose the majority of their customers. Moving into financial services might make sense, but I don't think these founders have the acumen to do this, as exhibited by their embarrassing attempt recently with their "checking and savings" account.
What Uber's IPO has shown is that VC funding is far too overly delusional. They buy their own bullshit about how growth trumps all but investors want profits and you won't see the real reaction until it starts trading for real, like Uber and Lyft. Until then, all you see is VCs talking their book and lazy tech writers repeating everything they say without actually thinking about it. So, sure some investors were stupid enough to invest $200M at $7B valuation, but I doubt Robinhood will grow into such lofty valuations that are reflected by the markets unless something drastically changes. 2M customers simply isn't enough.
- harryh 7y agoCharles Schwab is currently worth ~57 Billion TD Ameritrade: ~29 Billion E-Trade: ~11.5 Billion Fidelity Investments is privately owned, so harder to value, but is probably worth 50-75 Billion
- benburleson 7y agoI think the target market is the problem; older people have the money, and they're not moving from the places they know and trust.
- harryh 7y agoGive it time. Millennials are now the largest generation in the country. Soon enough, they will have the most money.
- nico_h 7y agoIsn’t that the problem? That the millennials are not accumulating wealth at the rate of the boomers?
- malandrew 7y agoEvery generation will eventually "have the most money". The question that matters is "when?". Will they get the most money because they've earned it or because all prior generations have died off enough for them to inherit it. I can't think of any mechanism by which wealth owned by the rich (i.e. old) can skip a generation. The only way this proves to be false is if we eventually discover the secret to healthful immortality and end up with a generation that never dies, and therefore never bequeaths its wealth to younger generations. The longer people live, the longer it will take younger generations to inherit the wealth of older generations. The only other way this proves false is if there is a massive wealth destroying event such as war, revolution, ecological collapse, etc. such that there isn't much wealth to inherit.
- perl4ever 7y ago"I can't think of any mechanism by which wealth owned by the rich (i.e. old) can skip a generation." The IRS can! See: https://en.wikipedia.org/wiki/Generation-skipping_transfer_tax https://en.wikipedia.org/wiki/Generation-skipping_transfer_t...
- jwagenet 7y agoIf Robinhood is playing the long game they are looking to capture the young market now so they are the first stop when the money comes pouring in.
- jgalt212 7y agoYes, the long game. It's very hard to prove that someone is doing the wrong thing when you invoke the term "the long game".
- adamnemecek 7y agoCompany valuations are based on the next 10 years rather than now.
- SwellJoe 7y agoYoung people get old and accrue wealth. I still have my Ameritrade account from 25 years ago (then Datek, which was, at the time, revolutionary), so I'm not even the obvious consumer of Robinhood services since there was friction for me to stop using Ameritrade and start using Robinhood, but I switched all of my investment activity over to Robinhood a year or so ago (still have some stock at Ameritrade, but I don't actively trade there).
- dragonwriter 7y ago> older people have the money, and they're not moving from the places they know and trust. Their money is moving, because old people—at a higher rate than young people—become dead people, whose former money is then controlled by someone else, often younger.
- YjSe2GMQ 7y agoInteractive Brokers ~23 Billion. So between the 5 companies and Robinhood the latter would take ~4% of the market cap. It's not that much, but I feel you.
- vonmoltke 7y agoAll of those are more than just brokerages. They all have consumer banks (in the case of TD Ameritrade, a decent-sized one). Schwab manages their own mutual funds. Fidelity is one of the top providers of 401k services in the US (and also manages their own mutual funds). Each of these companies is far more diverse than Robinhood, and their valuations are not comparable.
- SwellJoe 7y agoWhat prevents Robinhood from diversifying? They've figured out how to get a lot of customers fast. They're executing extremely well, IMHO, and that means they have many growth options. A team that can deliver a constantly improving product quickly for a huge customer-base is kind of unstoppable. And, it is irrational to compare startup valuations to established companies. They're not the same category. If they were, we'd look at F and GM and wonder why anyone would ever invest in TSLA (though, that's maybe not a great example because I suspect F and GM are better investments than TSLA right now, but not because they are more diverse or whatever...but, because there's a lot of risk built into TSLA due to sloppy management). But, it's easy to find examples of old companies beating new companies that seemed to be stronger investments. Google vs. Yahoo, Amazon vs. Borders, etc. Robinhood may be the biggest provider of 401k services in ten years. Or, they might partner with storefronts to offer banking+ services. Or, they might just keep bringing in new small dollar customers and eking out tiny profits by being more efficient; there's plenty of room at the bottom. Those other guys charge ten bucks a trade (or more)! You can bet all the people tucking away $100 from each paycheck don't want to lose 10% of it to fees right off the top. McDonald's doesn't make a lot of money from each customer, but they have a lot of customers. I have an Ameritrade account that I've had for 25 years (well, it was Datek back then), and I have a Robinhood account. I stopped automatic withdrawals to Ameritrade a year or two ago, and now all my trading happens on Robinhood. It's just a lower-friction experience. If Robinhood goes public, I'll consider buying, because it's a good and novel product in a market with a lot of money changing hands.
- ImprovedSilence 7y agoYeah I jumped ship from TD to Robinhood recently too. Ever since TDs commission free ETFs went to shit.
- walshemj 7y agoUntil you said "stock trading a dying business" I might have treated you comments with more respect.
- somebodythere 7y agoProfessional fund managers are struggling more and more to find alpha, do you think it's going to get easier for the newbie retail investors Robinhood attracts?
- AznHisoka 7y agoI look at the individual trading industry like online poker. There are lots of people who lose money playing poker online, yet it is still a huge industry with new suckers joining everyday. People are addicted to gambling even if they have no edge and lose money. It is the same with trading. Just look at the subreddit /r/wallstreetbets.
- walshemj 7y agoJust follow the rules that Benjamin Graham set out and invest for the long term and don't speculate - which is what a lot on here think investing is.
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- sonnyblarney 7y agoI'd imagine Robin Hood will sell insurance, their own funds, mortgages through a broker i.e. everything that those people need and would get anywhere else. 'RobinHood' is just a portal for sales to a generation. Also, FYI, this name 'RobinHood' i.e. a brand created to make people think somehow they are 'good' (and all of their 'occupy wallstreet we wanted to do somethiong' BS) is laughable rubbish and kind of stain on a generation. Robin Hood is the same as anything else in a different config. Nike is not somehow 'moral' because they take some arbitrary stand on their billboards. They still pay people pennies to make shoes. It's a sad statement to think any of this marketing actually works. It's fine to 'want to do good' but if people can't understand that it's only 'talk' ... well, very naive.
- thewastesadtime 7y agono ethical consumption under capitalism, and all that
- malandrew 7y agoThe thing that is odd about Robinhood is how it's a myth that has evolved pretty dramatically in how it is popularly interpreted and understood. Previously it was about a world where the productive class had their wealth usurped by the taxman and a man who took that money back to give it to those that produced that wealth. Now it's interpreted as a story about a man that takes from the rich and gives to the poor. There is no longer any consideration for who generated the wealth in the first place. Nowadays, your wealth still goes to either the taxman involuntary by threat of licit force by the state or to voluntarily people that provide you goods and services that you deem beneficial. The difference is the Robinhood now steals from the latter instead of the former.
- mindslight 7y agoThat's a disingenuous interpretation which just bakes in your desired framework. What actually changed is that abstraction increases the disconnect between making money and generating wealth. Much of that parasitic "taxman" class now claims to be in the private sector.
- 7y ago
- carlsborg 7y agoInteractive brokers actually publishes its numbers every month. Currently at a mere 630k accounts. But a whopping $150 Billion in Client Equity, and the other metric this industry uses is DARTs or daily average revenue generating trades, which is close to 800k. Robinhood probably sells most of its flow to HFTs at lower than what IB charges on commissions and IB is valued at 3x or $22B https://investors.interactivebrokers.com/ir/main.php?file=latestMetric https://investors.interactivebrokers.com/ir/main.php?file=la...
- deleted 7y ago[deleted]
- tenpies 7y ago> Stock trading is a dying business, and after the next stock market crash or recession, they will lose the majority of their customers. Is there historical evidence to back this up on older brokers? We've been in a ~10 year - largely unprecedented - bull market where you could throw darts and make money. Recessions usually destroy the returns of index funds and broad ETFs that millennials have been sold on. When the market's rising tide isn't raising every ship, picking ships becomes important. If anything a recession should increase the number of retail traders because their index ETF is getting destroyed, but there are a handful of companies or positions that are flourishing. In the past, at least we've had advisors who while glorified salesman you can at least call and will get you to calm down. Now we're going to have a generation of retail investors watching their investments tank 20% across the board with only Robinhood support to tell them to calm down? Is that going to be enough to stop them from liquidating their ETF and taking a more active role investing in recession-safe companies?
- scarface74 7y agoDo you have any cites of any 10 year period when more than 50 percent of managed funds beat their respective indexes?
- charleslmunger 7y agoBeat, net of fees. The goal of almost any managed fund is to extract the maximum amount of depositor money via fees. If you beat the market, raise your fees. If you don't, say it's because your investments are counter cyclical and lower risk, and keep charging your fees.
- scarface74 7y agoWhat Uber's IPO has shown is that VC funding is far too overly delusional VC investors were perfectly logical. The people who get in early on a Ponzi scheme often make out like bandits. It’s the people who bought in the public market who were the bigger suckers.
- mudil 7y ago"Stock trading is a dying business." On what planet?!