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Robinhood stock trading app confirms $110M raise at $1.3B valuation

techcrunch.com

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Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#141

Post by metalliqaz »

huac wrote: post #64
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Robinhood knows that people can just buy index funds and sit (which is what I do). But this doesn't make money, so they encourage people to buy individual stocks, "whatever new Elon Musk stock is out there", and trade on leverage. To some extent they want to make Robinhood a game, rather than an investment platform.

Wall street did that a loooong time ago

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#142

Post by dopamean »

lend000 wrote: post #115
AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

> Wouldn't want to enable people to make their own decisions with their money, would we?

Wow this is an ignorant thing to say in this context.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#143

Post by cturner »

scott00 wrote: post #119
mr_turtle wrote: post #48

Earlier quoted context omitted.

What's the long play then? Surely Robin Hood isn't absorbing the the transaction fees as a loss leader just to increase it's user base? If that's the play, any other company can emulate that.. The incentive seems to be this may cause a price war with existing brokerages.

There aren't actually any transactions fees to absorb. Wholesale brokers (think Citadel) pay retail brokers (think Robin Hood) for the privilege of executing their orders.

I found 'RHF SEC Rule 606 and 607 Disclosure' on their disclosures page. https://www.robinhood.com/legal/

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#144

Post by harryh »

metalliqaz wrote: post #131
harryh wrote: post #103

Earlier quoted context omitted.

This is a good time to trot out that old tech company adage: if you aren't paying for the product, you are the product. How does Robinhood make money? By selling order flow to market makers. Why do market makers want Robinhood's order flow? Because Robinhood's customers are, collectively, unsophisticated investor with no particular knowledge about the future performance of a stock making them the perfect customers fo…

And why is that a bad thing? If I make a couple of $100 trades in a day and make $10, what do I care if the pros used me for liquidity? I believe the same would happen even if I was paying $7 at Fidelity to make the trades. Not trying to be argumentative, just want to make sure I understand the conversation here.

Most Robinhood customers will not reliably make more money trading every day than they would buying and holding Vanguard Index funds ($VTI is a good place to start).

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#145

Post by lr4444lr »

AndrewKemendo wrote: post #16

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong? Even if you are a professional trader you'll take a bath on m…

But what's the added systemic risk outside of RobinHood's own capital?

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#146

Post by nommm-nommm »

SEJeff wrote: post #102
doctorbellario wrote: post #99

Earlier quoted context omitted.

What are returns like on "boring index-tracking ETFs"?

Ask Jack Bogle... I'm sure he'll have a lesson or 5 for you.

If someone is unfamiliar with the return on index funds they are unlikely to know who Jack Bogle is or what his lessons are.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#147

Post by [deleted] »

kogepathic wrote: post #105
sigstoat wrote: post #84

Earlier quoted context omitted.

> Robinhood is effectively lending money with little guarantee to take anything back and no source of income. i have not looked into robinhood's margin offering, so maybe it's very different, but in my other brokerage accounts, margin works something like this: i buy $10k of SPY. after the trade closes, the broker says "ok, you own $10k of SPY, and that's good for another $5k of margin." so then i can go buy another…

> so... they've got a great guarantee they can take it all back. And what of the case where the value of your SPY position falls below your $5k+interest debt to them? Edit: derp. A margin call would cover this.

[deleted]

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#148

Post by metalliqaz »

harryh wrote: post #114
joshdance wrote: post #6

Earlier quoted context omitted.

Can you extrapolate on order flow from unsophisticated investors? Why is it valuable?

It has to do with how people/companies called "market makers" make money. Let's say you want to buy a share of stock. Generally you don't end up buying it from another random person who happens to want to sell a share of stock at the exact same time. There might not even be another random person that wants to sell right now. Instead you are likely buying from a market maker. For pretty much any stock there are many m…

Great explanation, thank you.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#149

Post by kgwgk »

kcorbitt wrote: post #100
koolba wrote: post #58

Earlier quoted context omitted.

They don't charge commission. They do receive payments for order flow. If you don't pay back your margin they'll come after you like any other debt collector. There's nothing special about it.

Actually, if your investments fall in value to the point where it looks like your account is in danger of becoming insolvent, they'll likely immediately sell as many of your assets as it takes to make up the difference, locking in your leveraged losses. This is known as a margin call, and it's very unpleasant to be on the receiving end of one. The actual risk to the broker is minimal -- they just have to make sure to…

I think you may end owing money to the broker, if the margin call cannot be executed in a clean way. That has to be even more unpleasant.

Re: Robinhood stock trading app confirms $110M raise at $1.3B valuation

#150

Post by replies_to_all »

AndrewKemendo wrote: post #123
lend000 wrote: post #115

Earlier quoted context omitted.

Wouldn't want to enable people to make their own decisions with their money, would we? The fact that you have to make a paid account to use leverage (whereas you can trade indefinitely for free) is deterrent enough for most people who do not already actively manage their investments. I think Robinhood is doing a great service -- I just wish they would expose a better API.

Except it's credit, not their own money, so your naiive "how people spend their money has no consequences" attitude, doesn't hold water. That's the whole point.

It is a "credit" but with margin trading one can not fall below their inital investment, so no debt can be incurred, so it still is, "how people spend their money has no consequences [to others]. A user could just as easily lose all their money betting on penny stocks with no leverage.
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