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Robinhood reports 43% revenue decline

wsj.com

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Re: Robinhood reports 43% revenue decline

#41

Post by PragmaticPulp »

ryanmcbride wrote: post #2

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

I would be shocked if the GME / Reddit crowd made up more than a few percent of that decline. Robinhood has a lot of users across a lot of demographics. Reddit, however large, is more of a small microcosm of internet culture.

I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom and a wonky stock market where it felt like everyone was getting rich from stocks and options.

Now that the market is cooling off and a lot of their new users got burned when they learned that the market doesn't always go up, I suspect a lot of them are losing enthusiasm for frequent trading.

They did their IPO at just the right time.

Re: Robinhood reports 43% revenue decline

#42

Post by colinmhayes »

daniel-cussen wrote: post #27
kyriefh wrote: post #4

Earlier quoted context omitted.

this is a good example of the importance of comms and user education. robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. however, they were the front end that uninformed users experienced it through and thus took a huge PR hit

> robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. So why did you start out saying they didn't lock trading...to then say they did lock trading? Do some people will only read the first fifteen words of your post? Like are you aiming to fill the air with positive-sounding sounds that make Robinhood sound good? You think we do…

I don't think it's fair to say robinhood locked trading here. The brokers increased the amount of collateral needed to buy GME and robinhood didn't have the money. They were unable to buy more GME until their loan came through

Re: Robinhood reports 43% revenue decline

#43

Post by sandworm101 »

thebean11 wrote: post #31
jasode wrote: post #24

Earlier quoted context omitted.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

They had enough money to cover users' trades in securities other than GME, though, right? If I sell GME to buy AMZN, does that have different collateral implications to selling GME to buy GME an hour later? If I send them a bank transfer for $10k, they should have that money as soon as it clears right? There are many other ways they could have handled it beyond halting buying (and buying only) in an individual stock.…

>> just stop letting customers trade with unsettled funds.

I can think of nothing an app-based brokerage could do that would anger customers more. The entire point of the app is to facilitate quick and easy trading. The job of the app providers is to abstract away all of the backroom accounting. Requiring customers to wait for settlement would cause a riot.

Re: Robinhood reports 43% revenue decline

#44

Post by cevn »

Miner49er wrote: post #20
maneesh wrote: post #12

I applied for a Robinhood account and was never approved, after sending in details 3-4 times. Now, I find out from my bank, that Robinhood leaked my SSN, Drivers License#, Address, and Email to the dark web. WTF!!!! Is there any recourse here? My SSN is now all over the dark web.

Sounds like you probably got phished?

I wouldn't be surprised if a RH employee sold the info. Something similar happened to me with their "Robinhood Card" and many others. Fraudulent purchases being made when the card never left our possession. Either a database breach or their access controls are not good. Either way IMO you should not be involved with this company..

Re: Robinhood reports 43% revenue decline

#45

Post by gruez »

Palmik wrote: post #11
kyriefh wrote: post #4

Earlier quoted context omitted.

this is a good example of the importance of comms and user education. robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. however, they were the front end that uninformed users experienced it through and thus took a huge PR hit

They switched to reduce-only mode for GME, effectively going against the retail tide. The fact that other brokers did it is not an excuse. They should have known their user base better. And it's not like they did not have other options -- they could have posted more collateral, and given that they raised billions soon after, it was within the real of possibility for them.

>They should have known their user base better.

Hindsight is 20/20. Prior to that event happening, was there credible evidence that an S&P 500 company was going to get pumped 10x in price by a bunch of investors coordinating on social media?

Re: Robinhood reports 43% revenue decline

#46

Post by colinmhayes »

Justin_K wrote: post #8

This is what happens when your clients come to realize they're getting screwed in exchange for "free" trades. Search "robin hood order flow".

Robinhood is legally obligated to provide users with the lowest spread they can find. They make money because market makers are willing to pay robinhood to bring them customers who get the exact same price as everyone else. The market makers do this because they realize robinhood users are schmucks who are more likely to lose money than other investors.

Re: Robinhood reports 43% revenue decline

#47

Post by rurp »

jasode wrote: post #24
ryanmcbride wrote: post #2

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

I don't know, not having enough collateral to fund normal operations seems like a failure on the company's part to me. It's not like the collateral was an unknown requirement, it's the normal way the system works.

RH failed to adequitely plan for a surge in activity, which seems like an odd thing to blame retail trader ignorance on.

Re: Robinhood reports 43% revenue decline

#48

Post by michaelgrosner2 »

dnadler wrote: post #32
jasode wrote: post #24

Earlier quoted context omitted.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place.

In a way I sympathize with RH. If they were truthful that they didn't have enough money, they would have had to publicly admit they couldn't cover the purchases, which could have led to a run on them and everyone pulling out of Robinhood at once. In some ways, pulling the buy button was the best option they had. Too bad they didn't account for the fact that it would spawn a thousand conspiracy theories.

Re: Robinhood reports 43% revenue decline

#49

Post by gruez »

gretch wrote: post #26
woah wrote: post #9

Earlier quoted context omitted.

There's no reason not to use it for long term financial investment. I don't think your money is any safer or less safe between different brokerages. They rode a fad to greatly increase market share. The fad is ebbing, but I'm guessing they are still in a much better spot than they were in 2019.

Except robinhood suffers major security breaches (eg Nov 21) and then that information stolen on you can be used to hack your account. Sure the investment game is the same, but step 1 is to not get hacked.

>Except robinhood suffers major security breaches (eg Nov 21)

I went to search that up and got

>the unauthorized party obtained a list of email addresses for approximately five million people, as well as full names for a different group of approximately two million people. We’ve determined that several thousand entries in the list contain phone numbers

https://blog.robinhood.com/news/2021/11/8/data-security-inci...

I'm not trying to say the incident is okay, but calling a leaked email/name list a "major" breach is a stretch.

Re: Robinhood reports 43% revenue decline

#50

Post by paulgb »

rurp wrote: post #47
jasode wrote: post #24

Earlier quoted context omitted.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

I don't know, not having enough collateral to fund normal operations seems like a failure on the company's part to me. It's not like the collateral was an unknown requirement, it's the normal way the system works. RH failed to adequitely plan for a surge in activity, which seems like an odd thing to blame retail trader ignorance on.

> normal operations

But that's the thing, a bunch of their userbase aping into one stock isn't (or rather, wasn't) normal operations. It's the financial markets equivalent of jumping in an elevator.

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