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Robinhood S-1 IPO

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Re: Robinhood S-1 IPO

#91

“ A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected. For the three months ended March…

What's most ridiculous about this level of crypto trading volume on Robinhood is that you don't even own the crypto you trade there. You can't use your own wallet, you can't transfer it to your own wallet. Robinhood holds it; you're just gambling on their holdings.

It also speaks volumes about "crypto" these days. The vast majority of folks I know treat crypto as an investment opportunity (albeit, a highly speculative one). They're not concerned about blockchain technology or decentralized finance.

Robinhood is the perfect platform for them - There's no need to "swap" tokens or sign up with exchanges. For the most part, RH just "works".

Re: Robinhood S-1 IPO

#92
post #75

The Chief Legal Officer, Daniel Gallagher, made $30M this year. It breaks down into $257k cash, $4.2M bonus and $25.5M in stocks and options. This is a far larger amount than any other executive. In 2011-2015, Daniel Gallagher was 1 of 5 Commissioners of the SEC (Securities and Exchange _Commission_), the highest role of the SEC, appointed by the US President. He was hired by Robinhood in May 2020, and his previous j…

How do you value the stock options of a company that hasn’t had its IPO?

Re: Robinhood S-1 IPO

#93
post #79
post #41

Earlier quoted context omitted.

Think of these meme stocks as baseball cards or pokemon for gen-z and everything starts to make sense.

This is true at the level of basic buying and selling. However that isn't all that is happening with Robinhood. One of Robinhood's "innovations" was making it easier for novices to engage in more complicated trading including buying on margin, short selling, etc. This allows people to lose more money than they initially invested. A kid in the 90s wouldn't be buying Pokemon cards on credit with the potential to litera…

Robinhood has also gamified the trading experience. Once a day I get a push notification with something like "here are the day's biggest movers, hop on the train before it's too late!" and its essentially playing to that addictive quality that short term trading can have.

Re: Robinhood S-1 IPO

#94
post #48

I understand that many give Robinhood crap because it is not "sophisticated enough" or because of the Gamestop fiasco. Although many startups like to claim that they are "democratizing [x]", I honestly believe they did it. I have many friends that never traded before, and after they got their Robinhood account they feel comfortable enough to do it often. Even myself, who used to only trade a couple of times a year, s…

> I understand that many give Robinhood crap because it is not "sophisticated enough"

I don't recall ever seeing anyone criticise RH for this. It's RH's entire model to be unsophisticated and "democratise" trading.

> because of the Gamestop fiasco

Anyone who doesn't criticise RH for this has rocks in their heads. Anyone who believes RH's official explanation lacks basic critical thinking skills.

Re: Robinhood S-1 IPO

#95
post #10

Earlier quoted context omitted.

> “ lots of first time investors (18-24), who over time will grow to be big investors” Or will be burned by the next prolonged downturn and exit the market permanently.

Absolutely. Sofi is the smart play there vs RH. Getting HNW folks onboard with student loan and HCOL property mortgages, and then cross selling them deposit accounts and investing access. “Young Money” Fidelity or Schwab. (not investing advice)

Getting young people to get into debt is a very different thing than getting them to build assets. RH gives (small) margin loans from trading, not (large) student loans for marginally useful university courses.

Re: Robinhood S-1 IPO

#96

Earlier quoted context omitted.

It really irks me because “owning” it in that way flies in the face of cryptocurrency’s supposed raison d’être: anonymous decentralized currency. Dogecoin held at RH is none of those things.

What remains of cryptocurrency ethos? It’s all about the value today.

You could argue that it isn't even about the value, but simply the price.

Re: Robinhood S-1 IPO

#97
post #75

The Chief Legal Officer, Daniel Gallagher, made $30M this year. It breaks down into $257k cash, $4.2M bonus and $25.5M in stocks and options. This is a far larger amount than any other executive. In 2011-2015, Daniel Gallagher was 1 of 5 Commissioners of the SEC (Securities and Exchange _Commission_), the highest role of the SEC, appointed by the US President. He was hired by Robinhood in May 2020, and his previous j…

How do you value the stock options of a company that hasn’t had its IPO?

Maybe off of current worth estimated after sale of shares to earlier investors? I'm not completely sure though.

Re: Robinhood S-1 IPO

#98
post #75

The Chief Legal Officer, Daniel Gallagher, made $30M this year. It breaks down into $257k cash, $4.2M bonus and $25.5M in stocks and options. This is a far larger amount than any other executive. In 2011-2015, Daniel Gallagher was 1 of 5 Commissioners of the SEC (Securities and Exchange _Commission_), the highest role of the SEC, appointed by the US President. He was hired by Robinhood in May 2020, and his previous j…

Talk about a revolving door...

Re: Robinhood S-1 IPO

#99

Earlier quoted context omitted.

~70% was transactions and ~20% was interest. For comparison about 60% of Etrade's revenue is interest and 30% is fees + commissions. Either Robinhood has found a smarter business model re: selling order flow or they are making a killing on crypto fees. The commission business model is dead for good I think. https://www.nasdaq.com/articles/net-interest-revenue-will-fo...

>or they are making a killing on crypto fees. They don't charge commissions to trade crypto. Not sure where they're skimming the money but the terrible order fills you get there gives me an idea.

There are no regulations on execution quality for crypto. RH treats crypto as forex and quotes their customers a huge markup on the bid/ask spread (think airport forex booth type spreads). RH customers can only trade with RH and their crappy spreads. RH won't match customer crypto orders against each other.

Re: Robinhood S-1 IPO

#100
post #68
post #48

I understand that many give Robinhood crap because it is not "sophisticated enough" or because of the Gamestop fiasco. Although many startups like to claim that they are "democratizing [x]", I honestly believe they did it. I have many friends that never traded before, and after they got their Robinhood account they feel comfortable enough to do it often. Even myself, who used to only trade a couple of times a year, s…

Your use of the word "trade" versus "invest" perfect encapsulates the nuance of Robinhood. What exactly is Robinhood's product? It's certainly not the newly-minted traders -- their orders are "free". If you follow the money, it looks like it's mostly Pay For Order Flow (PFOF). I wonder why giant market-making hedge funds would pay for that order flow... Another tech faustian bargain.

> I wonder why giant market-making hedge funds would pay for that order flow... Another tech faustian bargain.

It really isn't. They're making money off the spread (eg. $105.01 bid vs $105.02 ask), which exists regardless of PFOF (regulation NMS mandates that the price be better or equal to NBBO). The reason why they want retail flow is that it's mostly "uninformed" and they're less likely to get run over.

matt levine explains this in detail: https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...

>I like to tell a fairly textbook version of that story. Market makers stand ready to buy or sell stock from or to customers; they try to buy for a bit less than they sell at, and pocket the spread. If you go out into the market and say “hey I’ll buy anyone’s stock for $10,” and a really smart hedge fund comes to you and sells you stock for $10, that’s probably bad. You’ve probably made a mistake. The hedge fund is selling you the stock for $10 because it knows it’s worth $8. This is called “adverse selection.”

>More subtly, if a really big mutual fund comes to you and sells you stock for $10, that also may be bad. The mutual fund is probably selling lots of stock, because it’s so big; it sells you a little, then sells a little more, then a little more, until it pushes the price down to $8. The mutual fund isn’t necessarily smart, but by virtue of being big and doing big trades, it moves the price; if you are on the other side of its trades, you get run over. This is also a kind of adverse selection: You buy at $10 and are stuck selling at $8. Part of the spread that market makers earn in public markets—the difference between their buying and selling prices—compensates them for adverse selection, the risk of being run over by a counterparty who knows something they don’t.

>Market makers, the textbook theory goes, would much rather trade with retail orders. Retail investors generally don’t know much, so if you buy stock from them you’re probably not making a mistake. And retail orders are generally small and uncorrelated: One investor buys a little, another comes along a moment later and sells a little, it’s all pretty random, and you’re not facing an avalanche of steady sell orders that push the price down. Trading with retail is so nice that market makers—wholesalers—will both give retail orders a tighter spread (pay more to buy their stock, charge less to sell stock to them) and pay their broker for the privilege of doing it.

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