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Imagine you found a number one trading platform and end up having to dilute your stake by a factor of 2 (or more likely) within a week because of a meme stock.

Imagine you found a number one trading platform and end up having to dilute your stake by a factor of 2 (or more likely) within a week because of a meme stock. I actually feel bad for the founding members at RH.

toomuchtodo 6y ago
I feel bad for the employees. I always feel bad for the employees (as their equity is always most at risk compared to others on the cap table, from all forms of devaluation or inability to obtain liquidity). But their lottery ticket is no different then folks jumping into a meme stock except they got sold on the idea they had to work for theirs. But the founders of Robinhood who built the Zynga of the capital markets? Not much empathy for them.
thatguy0900 6y ago
On the other hand, though, they might have far more users than they ever anticipated if some of the new retail investors stick around. If their brand doesn't end up completely dead and buried, at least.
- greensoap 6y ago
  I transferred all of my liquid capital out of RH this morning. I'm putting it back in Fidelity. I can live without the fancy interface; I cannot trust RH with my money or my business. And I didn't have that much there but once my positions are liquid I will be deleting RH.
maxerickson 6y ago
Who knows how aware they were of it, but this didn't happen just this week or just because of a meme. They built the business to operate in a certain way and then let it grow without ensuring they had the capital reserves to sustain those operations.
- omosubi 6y ago
  The founders certainly deserve criticism, but plenty of other brokers are doing the same thing, no? is this not a black swan event?
  - my_usernam3 6y ago
    Founders AND who ever does their communication. Their email about the volatility of stocks was so belittling. Even had a hyper link of "economics 101". From what I understand now, them having to halt buys on $GME wasn't really their call. However, given the tone of their emails, I can only blame them for the theories that they did it on behalf of HF.
    - omosubi 6y ago
      yeah I agree completely on the communication front. it just surprises me that the HN crowd preaches the gospel of growth at any cost and then when it blows up in robinhood's face everyone runs here to say that they should have known. seems like a lot of after-the-fact rationalization to me.
- swampthing 6y ago
  "Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.
  - maxerickson 6y ago
    Getting the underlying assumptions wrong or at least completely out of step with day to day operations is what I am getting at. It didn't happen overnight that they had extended customers more margin than they were able to secure.

toomuchtodo 6y ago

I feel bad for the employees. I always feel bad for the employees (as their equity is always most at risk compared to others on the cap table, from all forms of devaluation or inability to obtain liquidity). But their lottery ticket is no different then folks jumping into a meme stock except they got sold on the idea they had to work for theirs. But the founders of Robinhood who built the Zynga of the capital markets? Not much empathy for them.

thatguy0900 6y ago

On the other hand, though, they might have far more users than they ever anticipated if some of the new retail investors stick around. If their brand doesn't end up completely dead and buried, at least.

greensoap 6y ago
I transferred all of my liquid capital out of RH this morning. I'm putting it back in Fidelity. I can live without the fancy interface; I cannot trust RH with my money or my business. And I didn't have that much there but once my positions are liquid I will be deleting RH.

maxerickson 6y ago

Who knows how aware they were of it, but this didn't happen just this week or just because of a meme. They built the business to operate in a certain way and then let it grow without ensuring they had the capital reserves to sustain those operations.

omosubi 6y ago
The founders certainly deserve criticism, but plenty of other brokers are doing the same thing, no? is this not a black swan event?
- my_usernam3 6y ago
  Founders AND who ever does their communication. Their email about the volatility of stocks was so belittling. Even had a hyper link of "economics 101". From what I understand now, them having to halt buys on $GME wasn't really their call. However, given the tone of their emails, I can only blame them for the theories that they did it on behalf of HF.
  - omosubi 6y ago
    yeah I agree completely on the communication front. it just surprises me that the HN crowd preaches the gospel of growth at any cost and then when it blows up in robinhood's face everyone runs here to say that they should have known. seems like a lot of after-the-fact rationalization to me.
swampthing 6y ago
"Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.
- maxerickson 6y ago
  Getting the underlying assumptions wrong or at least completely out of step with day to day operations is what I am getting at. It didn't happen overnight that they had extended customers more margin than they were able to secure.