4 ms·

Robinhood’s Stock Is Now Worth Less Than Its Cash on Hand

37 points by marban 4y ago

nairboon 4y ago
This is completely expected for a company which screwed their biggest retail customers, back when the Gamestop saga was starting.
- Wyoming23 4y ago
  This is a weird way to say "retail investors couldn't continue to engage in illegal market manipulation for a couple days because of margin requirements between Robinhood and counterparties". They had to stop purchases for one or two securities for a couple days until they could secure a billion dollar loan and clear some pending transactions. It was far less of an issue than the conspiracy folks wanted it to be.
  - downrightmike 4y ago
    Yeah Fuck retail! Market Makers should be the only ones allowed to artificially destroy any companies that they feel like! Get back in your lane Pleb, this is not a game they'll ever let you succeed in.
  - lamentDOTconfig 4y ago
    - notavalleyman 4y ago
      This is an emotively charged post, but it's factually wrong, and basically a conspiracy theory. Over 100% short interest doesn't imply anyone broke the law. https://www.bloomberg.com/opinion/articles/2021-10-19/matt-levine-s-money-stuff-gamestop-baffles-the-sec-too https://www.bloomberg.com/opinion/articles/2021-10-19/matt-l... > Short interest can exceed 100%—as it did with GME—when the same shares are lent multiple times by successive purchasers https://www.reuters.com/article/us-retail-trading-shortselling-explainer/explainer-how-were-more-than-100-of-gamestops-shares-shorted-idUSKBN2AI2DD https://www.reuters.com/article/us-retail-trading-shortselli... > HOW CAN MORE THAN 100% OF A COMPANY’S SHARES BE SHORTED? > Once the short seller borrows the shares from the lender and then sells them back into the market, the new owner of the shares is free to lend them out, just as the previous owner did, and have no idea they are on the other side of a short sale. Also, the reason the buttons were taken off the app, was because RH were having to post extra collateral due to volatiltiy. RH had to draw down extra loans to pay the collateral. For one broker, the collateral was 100%. The memeing was not sustainable for RH. There was no conspiracy. https://www.bloomberg.com/news/articles/2021-01-28/robinhood-is-said-to-draw-on-credit-lines-from-banks-amid-tumult?sref=gni836kR https://www.bloomberg.com/news/articles/2021-01-28/robinhood... https://www.wsj.com/articles/gamestop-trading-restrictions-blamed-on-wall-streets-clearing-firm-by-online-broker-11611867105?mod=mhp https://www.wsj.com/articles/gamestop-trading-restrictions-b...
  - SeanAnderson 4y ago
    Payment for order flow should be illegal. It was invented by Madoff and is illegal in most countries. Citadel submitted a request to the SEC stating that payment for order flow represents a major conflict of interest and should be made illegal. When the laws weren't changed - Citadel built their business model around it. I don't fault retail for approaching the situation in the way they did. It seems logical given the understanding that they're being preyed upon in situations advertised as beneficial to them.
caleblloyd 4y ago
Share price is $7 and EPS is -$3. Assuming current market cap == cash on hand, this cash gets them a little over 2 years of runway at the current burn rate.
thehappypm 4y ago
I don’t see how this is a meaningful number. Any company can go to the bank, get a 10% interest loan, and suddenly have a ton of cash on hand. Getting that loan doesn’t mean much for the company’s value.
- smotched 4y ago
  Exactly, it would matter if it was actually from profits.
  - santoshalper 4y ago
    It doesn't necessarily "matter", but it is an interesting view on how investors view Robinhood. Essentially, they are saying you'd be better off taking that cash and just sitting on it than putting it in HOOD. As though it was an engine for wealth destruction.
    - telchior 4y ago
      That last sentence could apply to either the company or its users, really.
    - mwint 4y ago
      Are they necessarily sitting on it, vs. investing in other places?
wodenokoto 4y ago
Apt that this is published on Yahoo.com, who also owned assets worth more than the company valuation.
- marban 4y ago
  BB article via Y! for the sake of readability.
Shindi 4y ago
Robinhood's PR team is doing an admirable job at trying to control these comments but the fact of the matter is that Robinhood's net margins are -200%. A random kid selling lemonade on the street and occasionally getting robbed has better margins than HOOD. [1] https://www.macrotrends.net/stocks/charts/HOOD/robinhood-markets/profit-margins https://www.macrotrends.net/stocks/charts/HOOD/robinhood-mar...
- mwint 4y ago
  Children’s lemonade stand robbery frequency sounds like a good top-level crime statistic. Zillow should list the “CLSR Index” for each neighborhood.
cuteboy19 4y ago
At what point do we say "we bad at business, here, have your money back"
dragontamer 4y ago
Weird metric but the overall point stands. Normally you'd make this comparison to Shareholder equity (Assets - liabilities). That is, you add up all cash, investments, payable accounts, real estate, etc. etc. in one pile (assets), and subtract out all debts, payables to users, outflows etc. etc. in another (liabilities). Cash alone is meaningless. Fortunately, cash-on-hand happens to be close to the shareholder equity value, so the overall arguments made in this discussion remain valid. The most recent 10K from Robinhood suggests they had ~$7 Billion shareholder equity back in May 2022. So the overall "weirdness" is still worth thinking about. Almost all companies are worth "more" than their equity on hand, because we all expect them to be "profit machines", with some kind of weird ability to turn those assets into a sustainable form of making money. ------------- This kind of valuation means that shareholders expect Robinhood to be losing money in the short term (maybe long term?) to the point that those assets will be lost over time.

37 points by marban 4y ago

This is completely expected for a company which screwed their biggest retail customers, back when the Gamestop saga was starting.

Wyoming23 4y ago
This is a weird way to say "retail investors couldn't continue to engage in illegal market manipulation for a couple days because of margin requirements between Robinhood and counterparties". They had to stop purchases for one or two securities for a couple days until they could secure a billion dollar loan and clear some pending transactions. It was far less of an issue than the conspiracy folks wanted it to be.
- downrightmike 4y ago
  Yeah Fuck retail! Market Makers should be the only ones allowed to artificially destroy any companies that they feel like! Get back in your lane Pleb, this is not a game they'll ever let you succeed in.
- lamentDOTconfig 4y ago
  - notavalleyman 4y ago
    This is an emotively charged post, but it's factually wrong, and basically a conspiracy theory. Over 100% short interest doesn't imply anyone broke the law. https://www.bloomberg.com/opinion/articles/2021-10-19/matt-levine-s-money-stuff-gamestop-baffles-the-sec-too https://www.bloomberg.com/opinion/articles/2021-10-19/matt-l... > Short interest can exceed 100%—as it did with GME—when the same shares are lent multiple times by successive purchasers https://www.reuters.com/article/us-retail-trading-shortselling-explainer/explainer-how-were-more-than-100-of-gamestops-shares-shorted-idUSKBN2AI2DD https://www.reuters.com/article/us-retail-trading-shortselli... > HOW CAN MORE THAN 100% OF A COMPANY’S SHARES BE SHORTED? > Once the short seller borrows the shares from the lender and then sells them back into the market, the new owner of the shares is free to lend them out, just as the previous owner did, and have no idea they are on the other side of a short sale. Also, the reason the buttons were taken off the app, was because RH were having to post extra collateral due to volatiltiy. RH had to draw down extra loans to pay the collateral. For one broker, the collateral was 100%. The memeing was not sustainable for RH. There was no conspiracy. https://www.bloomberg.com/news/articles/2021-01-28/robinhood-is-said-to-draw-on-credit-lines-from-banks-amid-tumult?sref=gni836kR https://www.bloomberg.com/news/articles/2021-01-28/robinhood... https://www.wsj.com/articles/gamestop-trading-restrictions-blamed-on-wall-streets-clearing-firm-by-online-broker-11611867105?mod=mhp https://www.wsj.com/articles/gamestop-trading-restrictions-b...
- SeanAnderson 4y ago
  Payment for order flow should be illegal. It was invented by Madoff and is illegal in most countries. Citadel submitted a request to the SEC stating that payment for order flow represents a major conflict of interest and should be made illegal. When the laws weren't changed - Citadel built their business model around it. I don't fault retail for approaching the situation in the way they did. It seems logical given the understanding that they're being preyed upon in situations advertised as beneficial to them.

caleblloyd 4y ago

Share price is $7 and EPS is -$3. Assuming current market cap == cash on hand, this cash gets them a little over 2 years of runway at the current burn rate.

thehappypm 4y ago

I don’t see how this is a meaningful number. Any company can go to the bank, get a 10% interest loan, and suddenly have a ton of cash on hand. Getting that loan doesn’t mean much for the company’s value.

smotched 4y ago
Exactly, it would matter if it was actually from profits.
- santoshalper 4y ago
  It doesn't necessarily "matter", but it is an interesting view on how investors view Robinhood. Essentially, they are saying you'd be better off taking that cash and just sitting on it than putting it in HOOD. As though it was an engine for wealth destruction.
  - telchior 4y ago
    That last sentence could apply to either the company or its users, really.
  - mwint 4y ago
    Are they necessarily sitting on it, vs. investing in other places?

wodenokoto 4y ago

Apt that this is published on Yahoo.com, who also owned assets worth more than the company valuation.

marban 4y ago
BB article via Y! for the sake of readability.

Shindi 4y ago

Robinhood's PR team is doing an admirable job at trying to control these comments but the fact of the matter is that Robinhood's net margins are -200%. A random kid selling lemonade on the street and occasionally getting robbed has better margins than HOOD. [1] https://www.macrotrends.net/stocks/charts/HOOD/robinhood-markets/profit-margins https://www.macrotrends.net/stocks/charts/HOOD/robinhood-mar...

mwint 4y ago
Children’s lemonade stand robbery frequency sounds like a good top-level crime statistic. Zillow should list the “CLSR Index” for each neighborhood.

cuteboy19 4y ago

At what point do we say "we bad at business, here, have your money back"

dragontamer 4y ago

Weird metric but the overall point stands. Normally you'd make this comparison to Shareholder equity (Assets - liabilities). That is, you add up all cash, investments, payable accounts, real estate, etc. etc. in one pile (assets), and subtract out all debts, payables to users, outflows etc. etc. in another (liabilities). Cash alone is meaningless. Fortunately, cash-on-hand happens to be close to the shareholder equity value, so the overall arguments made in this discussion remain valid. The most recent 10K from Robinhood suggests they had ~$7 Billion shareholder equity back in May 2022. So the overall "weirdness" is still worth thinking about. Almost all companies are worth "more" than their equity on hand, because we all expect them to be "profit machines", with some kind of weird ability to turn those assets into a sustainable form of making money. ------------- This kind of valuation means that shareholders expect Robinhood to be losing money in the short term (maybe long term?) to the point that those assets will be lost over time.