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To: Julius Wong who wrote (148)11/2/2020 10:57:42 AM
From: Glenn Petersen
   of 178
 
Chinese fintech giant Lufax plans international push as $2.36 billion U.S. IPO gets off to a rocky start

PUBLISHED MON, NOV 2 20201:58 AM EST
Arjun Kharpal
CNBC.com

KEY POINTS

-- Chinese fintech giant Lufax is laying the groundwork for international expansion over the next five years, following a cash injection from its U.S. IPO, the company’s chief executive told CNBC.

-- Lufax started trading on the New York Stock Exchange on Friday raising around $2.36 billion.

-- Lufax CEO Greg Gibb said countries in Southeast Asia could be “a great long-term opportunity.”

SHANGHAI — Chinese fintech giant Lufax is laying the groundwork for international expansion over the next five years, following a cash injection from its U.S. IPO, the company’s chief executive told CNBC.

Lufax started trading on the New York Stock Exchange on Friday raising around $2.36 billion. The stock fell as much as 14.3% on debut but pared some of those losses to close at $12.85 per share, around 4.8% lower than the $13.50 offering price. U.S. stock markets sold off last week.

The company, which partners with financial institutions to offer small business loans and wealth management products via its platform, is starting to weigh a bigger overseas push after a small initial foray.

“The way we look at the international side, particularly South East Asia, is a great long-term opportunity. In many of the markets in Southeast Asia, you add it up, it’s still smaller than a province in China, so our immediate priority for the next three of four years in terms of growth is clearly the domestic market,” Greg Gibb, CEO of Lufax, told CNBC in an interview that aired Monday.

“But if you think about the changes going around Hong Kong, Greater Bay, opening up those links there, we think it’s the right time to start to put some preparation in place for what, five years out, could be quite interesting.”

The Greater Bay Area is a plan by China to connect Hong Kong and Macau and major cities in South China.

In 2017, Lufax launched a wealth management platform in Singapore. It has also launched services in Indonesia and Hong Kong. But income from international operations are “not yet material” to the business, according to the IPO prospectus.
Gibb said that the push overseas will involve partnering with local brands but with Lufax technology behind the product. The company touts its ability to use data and artificial intelligence to help effectively match customers to the right financial product.

U.S. listing

Lufax went public in New York despite the tensions between the U.S. and China. Lawmakers in Washington are pushing for greater scrutiny of Chinese companies through proposed legislation that threatens to delist some firms in the U.S.

Other Chinese firms have increasingly looked to markets in Shanghai and Hong Kong for IPOs or secondary offerings. For example, Alibaba, JD.com and NetEase, three companies listed in the U.S., carried out secondary listings in Hong Kong.

Ant Group meanwhile will carry out a dual listing in Hong Kong and Shanghai on Thursday in what is expected to be the world’s biggest IPO.

But Lufax is not alone in listing in the U.S. Chinese carmakers Xpeng Motors and Li Auto both went public on Wall Street earlier this year.

“Our view is that we are a Chinese company that has a lot of transparency that actually welcomes being on a global stage. We think that… New York is a great place for us to start, it gives us the access to the right investors, to the right analyst coverage,” Gibb told CNBC in response to a question about listing in New York.

“As you know, over the longer term, you have many options as to what you can do. But for now we think this is the good first step.”

When asked if the company had discussed a secondary listing in Shanghai or Hong Kong, Gibb said it’s “not something that we immediately plan” for but “if we had to pull the trigger it’s reasonably straightforward.”

Regulatory risk

Lufax was once a peer-to-peer lending giant in China. But tougher regulations on the sector from Chinese authorities forced the company to scale back on that business. In 2019, Lufax exited peer-to-peer lending.

Regulatory risks are certainly high for fintech companies in China where the rules sometimes struggle to catch up with the technology.

Gibb said that Lufax is well-equipped to deal with any changes from regulators down the road.

“One of the things which is true about China in general is it changes very quickly. The market changes very quickly, the regulations are changing to keep up with the market, one of our marks of success, the reason that we’ve actually brought the company public now, is because we think the regulatory framework has improved a lot over the last couple of years,” Gibb told CNBC.

“If you went back five years ago one of the issues with fintech in China was there wasn’t much regulation and that led to its own set of problems for others. But we think actually the goalposts are increasingly clear. The regulatory risk are declining. There will always be change. But one of our key strengths that we have developed over this period is the ability to pivot when you need to and always have a plan B.”

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From: Glenn Petersen11/21/2020 5:10:56 PM
   of 178
 
Lagarde Says Her ‘Hunch’ Is That ECB Will Adopt Digital Currency

Alexander Weber
Bloomberg
11/12/2020

(Bloomberg) -- European Central Bank President Christine Lagarde signaled that her institution could create a digital currency within years in what would be a dramatic change to the euro zone’s financial sector.

“My hunch is that it will come,” Lagarde said Thursday during a virtual panel discussion hosted by the ECB. “If it’s cheaper, faster, more secure for the users then we should explore it. If it’s going to contribute to a better monetary sovereignty, a better autonomy for the euro area, I think we should explore it.”
The president said it might be two to four years before the project could be launched as it addresses concerns over money laundering, privacy, and the technology involved.

That’s still fast compared to its peers. On the same panel, Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey reiterated their caution. Powell said the Fed will “carefully and thoughtfully” review the issue, and Bailey said there’s a “lot of hard work to think through the implications.”

The ECB took a major step last month by launching a public consultation that runs until the middle of January. Policy makers intend to decide around mid-2021 whether to initiate a full-fledged project and prepare for a possible launch.

China is also advance with plans for a central-bank digital currency.

“We’re not racing to be first,” Lagarde said. “We are moving ahead diligently, not incautiously. We will be prudent.”

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From: Sr K12/12/2020 8:31:36 PM
1 Recommendation   of 178
 
Affirm Holdings

Affirm Holdings Inc. is postponing its initial public offering, according to people familiar with the matter, the second company in as many days to pull back from the red-hot IPO market.

The point-of-sale lender, which had been set to begin marketing its shares to investors this coming week ahead of a December listing, now won’t go public until January at the earliest, the people said. While the reasons aren’t entirely clear, people familiar with the matter cited the extreme first-day pops this past week in the shares of DoorDash Inc. and Airbnb Inc. and delays at the Securities and Exchange Commission amid a flood of listing requests.

The move comes just a day after The Wall Street Journal reported that videogame company Roblox Corp., which was on a similar IPO timetable, put its listing on pause until early next year.

Roblox decided to wait because of challenges arising from the first-day jumps, according to people familiar with the offering. When shares jump like Airbnb’s and DoorDash’s did, the companies miss out on billions of dollars they might have raised and instead hand it to select investors lucky enough to get IPO allocations.

Roblox’s board met Friday and determined that, given those considerations, the company and its underwriters should rethink how to price the offering, one of the people said.

“Based on everything we have learned to date, we feel there is an opportunity to improve our specific process for employees, shareholders and future investors both big and small,” Roblox Chief Executive David Baszucki said in a memo to employees that was viewed by the Journal.

Both Roblox and Affirm will consider selling a larger portion of their shares and changing the mix of stock to be sold by the company, its employees and shareholders as they seek to mitigate any initial pop, some of the people said.

This year has been the busiest ever for IPOs as measured by dollars raised in the U.S., a frenzy that has been fed by a wave of traditional listings as well as deals by shell companies known as special purpose acquisition companies. Affirm and Roblox were set to join an unusual year-end rush of companies seeking to go public after the coronavirus pandemic upended the traditional new-issue calendar. Both companies were expected to draw strong investor demand.

Affirm, which offers online shoppers the ability to pay for goods in installments through short-term loans, was expected to fetch a valuation of as much as $10 billion.

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From: Glenn Petersen1/11/2021 6:08:09 PM
   of 178
 
Walmart launches fintech startup to build digital financial products for customers, employees

Julia La Roche
·Correspondent
Yahoo Finance
Mon, January 11, 2021, 3:15 PM CST·1 min read

Walmart ( WMT), the world's largest retailer, announced on Monday that it is launching a financial technology (fintech) startup in partnership with Palo Alto, Calif.–based venture capital firm Ribbit Capital, a backer of Robinhood, Credit Karma and Affirm.

The new fintech company, which will be majority-owned by Walmart, aims to “develop and offer modern, innovative and affordable financial solutions” targeting Walmart's customers and employees.

"For years, millions of customers have put their trust in Walmart to not only save them money when they shop with us but help them manage their financial needs. And they've made it clear they want more from us in the financial services arena," Walmart U.S. CEO John Furner said in the release.

The board includes Furner, Walmart CFO Brett Biggs, and Ribbit Capital's founder and managing partner Meyer Malka. The startup, which has yet to be named, will add more board members and hire a management team. The new company expects to grow through acquisitions and partnerships.

“When we combine our deep knowledge of technology-driven financial businesses and our ability to move with speed with Walmart's mission and reach, we can create and deliver financial offerings that are second to none,” Malka said in a statement.

As the world's largest retailer, more than 265 million customers visit Walmart each week worldwide across its 11,500 stores in 27 countries and its e-commerce websites. In the U.S., Walmart has a fleet of nearly 5,000 stores, with 90% of the U.S. population living within 10 miles of a location.

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From: Glenn Petersen1/13/2021 3:51:30 PM
   of 178
 
A major fintech IPO:

Max Levchin’s Affirm pops nearly 100% after market debut

PUBLISHED WED, JAN 13 202112:24 PM EST
UPDATED WED, JAN 13 20212:48 PM EST
Jessica Bursztynsky @JBURSZ

KEY POINTS

-- Shares of Affirm, an online payments company, began trading on the Nasdaq.

-- Affirm priced its shares at $49 apiece, above its target range of $41 to $44 each.

-- The stock began trading at $90.90 per share.

Shares of payments company Affirm soared more than 103% in its initial public offering on the Nasdaq, kicking off what’s likely to be a busy season for market debuts.

The stock began trading at $90.90 per share. Affirm had priced its shares at $49 apiece, above its target range of $41 to $44 each.

Founded in 2013 by PayPal co-founder Max Levchin, Affirm has become prominent in the “buy now pay later” space that offers point-of-sale loans. The company allows customers to finance online purchases that can be paid back in monthly installments without accruing compounding interest.

It works with around 6,500 retailers, including Peloton, Wayfair, Walmart and direct-to-consumer eyeglasses company Warby Parker. In an update to its IPO filing, Affirm said it is used by more than 6.2 million people. Affirm also partnered with Shopify last year, allowing merchants to offer installment loans on products they sell.

Affirm brought in roughly $510 million in revenue for the fiscal year ended on June 30, a 93% jump from last year, according to its filings. In the three months ending Sept. 30, revenue grew 98% year over year, while net losses fell by roughly half to $15.3 million.

Affirm makes money when it helps a merchant make a sale. It also earns interest income on loans it buys from bank partners and some consumer loans. The rate it charges varies by consumers’ creditworthiness, but often starts at 0%.

“Our goal is to be a viable alternative to credit cards,” Levchin told CNBC ahead of the company’s first trade.

Morgan Stanley, Goldman Sachs and Allen & Co were the lead underwriters for the offering. Major investors include Peter Thiel’s Founders Fund, Khosla Ventures and Lightspeed Venture Funds.

Affirm’s market debut could mark another successful venture for Levchin, who owns 27.5 million shares in the online lender. Following PayPal’s sale to eBay in 2002, Levchin started the social application company Slide. That sold to Google in 2010 for a reported $182 million.

Affirm, which trades under the symbol AFRM, has made CNBC’s Disruptor 50 list twice.
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From: Glenn Petersen1/31/2021 6:45:28 AM
   of 178
 
The Silicon Valley Start-Up That Caused Wall Street Chaos

New York Times
January 30, 2021



The online trading app Robinhood became a cultural phenomenon and a Silicon Valley darling with a promise to wrest the stock market away from Wall Street’s traditional gatekeepers and “let the people trade” — making it as easy to put millions of dollars at risk as it is to summon an Uber.

This past week, in the middle of a market frenzy pitting amateur traders against hedge fund bigwigs, that veneer began to chip. As it turned out, Robinhood was at the mercy of the very industry it had vowed to upend.

The frenzy morphed into a crisis when legions of armchair investors on Robinhood, who had been buying up options and shares of GameStop, a video game retailer, enlarged those bets and also began making big trades in other stocks, including AMC Entertainment.

As the trading mania grew, the financial system’s risk reduction mechanisms — managed by obscure entities at the center of the stock market called clearinghouses — kicked in on Thursday, forcing Robinhood to find emergency cash to continue to be able to trade. It had to stop customers from buying a number of heavily traded stocks and draw on a more than $500 million bank line of credit. On Thursday night, the company also took an emergency infusion of more than $1 billion from its existing investors.

A high-flying start-up suddenly looked a lot like an overwhelmed, creaky company.

“From a marketing standpoint they position themselves as new, innovative, cool,” said Peter Weiler, the co-chief executive of the brokerage and trading firm Abel Noser. “What I think everyone is missing is, when you peel the onion back they are just a heavily regulated business.”


Robinhood’s distress follows a familiar narrative: A Silicon Valley company that promised to disrupt an industry ends up being overcome by the forces it unleashed and has to be reined in by regulators, or in this case, the industry it promised to change. Its arc is not all that different from Facebook and Google, which changed the ways in which billions of people socialize and search for information, but are now caught in the cross hairs of lawmakers and an angry public.

“They were trying to change the rules of the road without understanding how the road was paved and without any respect for the existing guard rails,” said Chris Nagy, a former trading executive at TD Ameritrade and the co-founder of the Healthy Markets Association, a nonprofit that seeks to educate market participants. “It ended up creating risk for their customers and systemic risk for the market more broadly.”

The fiasco will almost certainly have consequences for the company. The Securities and Exchange Commission said on Friday that it would closely review any actions that may “disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.” Lawmakers on both sides of the aisle called for hearings over complaints that customers were shut out of trades.

After Robinhood limited some trading on Thursday and the price of the stock plunged, furious users flooded online app stores with vitriolic reviews, with some accusing Robinhood of doing the bidding of Wall Street. Others sued the company for the losses they sustained. Robinhood’s continuing vulnerability, even after raising $1 billion, became clear on Friday when it restricted trading in more than 50 stocks.

“It was not because we wanted to stop people from buying these stocks,” Robinhood said in a blog post on Friday night. Rather, the start-up said, it restricted buying in volatile stocks so that it could “comfortably” meet deposit requirements imposed by its clearinghouses, which it noted had increased tenfold during the week.

None of this seems to be slowing down its growth. Even as Robinhood’s actions angered existing customers, it was winning new ones. The app was downloaded more than 177,000 times on Thursday, twice the daily download rate over the previous week, according to Apptopia, a data provider, and it had 2.7 million daily active users on its mobile app that day, its highest ever. That’s more than its rivals — Schwab, TD Ameritrade, E*Trade, Fidelity and Webull — combined.

All Growth, Few Guardrails

Controversy is not new for Robinhood.

The two Stanford classmates who created the company in 2013 said from the beginning that their focus was on “democratizing finance” by making trading available to anyone. To do so, the Menlo Park, Calif., company has repeatedly employed a classic Silicon Valley formula of user-friendly software, brash marketing and a disregard for existing rules and institutions.

Online brokers had traditionally charged around $10 for every trade, but Robinhood said that customers of its phone app could trade for free. The move drew in hordes of young investors.

In building its business, the company disregarded academic research showing how frequent, frictionless trading generally does not lead to good financial outcomes for investors. The risks to customers became clear last summer when a 20-year-old college student’s suicide note blamed a six-figure trading loss for his death.

Robinhood also popularized options trading among novices. An option is generally cheaper than buying a stock outright, but has the potential to lead to much bigger and faster gains and losses, which is why regulators and brokers have traditionally restricted trading in these financial contracts to more sophisticated traders.

Robinhood’s marketing, meanwhile, papered over the fact that its business model, and the free trading, were paid for by selling customer’s orders to Wall Street firms in a system known as “payment for order flow.” Big trading firms like Citadel Securities and Virtu Financial give Robinhood a small fee each time they buy or sell for its customers, typically a fraction of a penny per share. These trading firms make money, in turn, by pocketing the difference, known as the “spread,” between the buy and sell price on any given stock trade, and the more trades they handle, the greater their potential revenue. Many other online brokers rely on a similar system, but Robinhood has negotiated to collect significantly more for each trade than other online brokers, The Times has found.

The mismatch between Robinhood’s marketing and the underlying mechanics led to a $65 million fine from the S.E.C. last month. The agency said that Robinhood had misled customers about how it was paid by Wall Street firms for passing along customer trades.

Robinhood has also run afoul of regulators as it rushed to release new products. In December 2018, the company said it would offer a checking and savings account that would be insured by the Securities Investor Protection Corporation, or S.I.P.C., which protects investors when a brokerage firm fails.

But S.I.P.C.’s then-chief executive said he hadn’t heard about Robinhood’s plan, and he pointed out that the S.I.P.C. doesn’t protect plain-vanilla savings accounts — that would be the job of the Federal Deposit Insurance Corporation. It took almost a year for Robinhood to reintroduce the product, saying in a blog post that it “made mistakes” with its earlier announcement.

“They went in trying to make big splashes and they often had to get reeled back in,” said Scott Smith, a brokerage analyst at the financial firm Cerulli Associates.

The Clash With Wall Street

Robinhood’s ambitions and amateurism collided in recent weeks as small investors, many of them on a mission to challenge the dominance of Wall Street, used its free trades to push up the stock of GameStop and other companies. Rampant speculation on options contracts helped drive the rise of GameStop’s shares from about $20 on Jan. 12 to nearly $500 on Thursday — a rally that forced Robinhood to hit the brakes on its own customers.

One institution that tripped up Robinhood this past week is a clearinghouse called the Depository Trust & Clearing Corporation. Owned by its member financial institutions including Robinhood, the D.T.C.C. clears and settles most stock trading, essentially making sure that the money and the shares end up in the right hands. (Options trades are cleared by another entity.)

But the D.T.C.C.’s role is more than just clerical. Clearinghouses are supposed to help insulate a particular market from extreme risks, by making sure that if a single financial player goes broke, it doesn’t create contagion. To do its job, the D.T.C.C. requires its members to keep a cushion of cash that can be put toward stabilizing the system if needed. And when stocks are swinging wildly or there’s a flurry of trading, the size of the cushion it demands from each member — known as a margin call — can grow on short notice.

That’s what happened on Thursday morning. The D.T.C.C. notified its member firms that the total cushion, which was then $26 billion, needed to grow to $33.5 billion — within hours. Because Robinhood customers were responsible for so much trading, they were responsible for footing a significant portion of the bill.

The D.T.C.C.’s demand is not negotiable. A firm that can’t meet its margin call is effectively out of the stock trading business because D.T.C.C. won’t clear its trades any more. “If you can’t clear a trade, you can’t trade a trade,” said Robert Greifeld, the former chief executive of Nasdaq and current chairman of Virtu Financial. “You’re off the island. You’re banished.”


For veteran players like Citadel Securities and JPMorgan Chase, generating additional hundreds of millions of dollars on short notice was not a problem. But for a start-up like Robinhood, it was a mad scramble.

While it cobbled together the needed cash from its credit line and investors, Robinhood limited customers from buying GameStop, AMC and other shares. Allowing its investors to sell these volatile stocks — but not buy them — reduced its risk level and helped it meet requirements for additional cash, Robinhood said in its blog post.

Ultimately, the company succeeded in pulling together roughly $1 billion from some of its existing investors, including the venture firms Sequoia Capital and Ribbit Capital. As a sweetener, Robinhood issued special shares to those investors that will give them a better deal when the company goes public, as early as this year.

But the quick deal left more than one observer scratching their heads.

“How does an online broker find itself in need of an overnight infusion of a billion dollars?” asked Roger McNamee, a longtime investor who co-founded the private-equity firm Elevation Partners. “There’s something about this that says somebody is really scared about what’s going on.”

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To: Glenn Petersen who wrote (154)1/31/2021 7:24:36 AM
From: Thehammer
   of 178
 
Robinhood has also run afoul of regulators as it rushed to release new products. In December 2018, the company said it would offer a checking and savings account that would be insured by the Securities Investor Protection Corporation, or S.I.P.C., which protects investors when a brokerage firm fails.

But S.I.P.C.’s then-chief executive said he hadn’t heard about Robinhood’s plan, and he pointed out that the S.I.P.C. doesn’t protect plain-vanilla savings accounts — that would be the job of the Federal Deposit Insurance Corporation. It took almost a year for Robinhood to reintroduce the product, saying in a blog post that it “made mistakes” with its earlier announcement.




If this is really true, then I wouldn't trust a penny to these guys. The difference between FDIC and SIPC is pretty dang basic. It is part of the series 7 that every new broker must take.

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To: Thehammer who wrote (155)2/1/2021 9:54:09 PM
From: Glenn Petersen
   of 178
 
Cowboys. Presumably, they have changed out their legal team. It will be interesting to see how they fare now that they have attracted the attention of our bottom-feeding, attention-grabbing Congress critters.

The Reddit crowd has done this before. Two years ago they were organizing pumps and dumps of various cryptocurrencies.

Robinhood raises another $2.4 billion as broker app deals with retail trading frenzy

PUBLISHED MON, FEB 1 202112:03 PM EST
UPDATED MON, FEB 1 20212:22 PM EST
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
CNBC.com

KEY POINTS

-- Online brokerage Robinhood said it raised another $2.4 billion from investors.

-- That brought to $3.4 billion the firm has raised amid the recent market volatility.

Discount online brokerage Robinhood said Monday it has raised another $2.4 billion from investors amid the extreme bouts of market volatility.

The $3.4 billion it has mobilized since Thursday exceeds the total amount it has raised since its founding in 2013.

“This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we’ve seen this year,” the company said.

“We’re witnessing a movement of everyday people taking control of their own financial futures, many investing for the first time through Robinhood.”

It said it will use the new funding to expand its programs on financial literacy.

“With this funding, we’ll build and enhance our products that give more people access to the financial system,” the company’s statement said.

Robinhood has been in the center of the storm around a move by retail investors over the past week that has squeezed hedge funds that bet big against stocks including GameStop and AMC Entertainment.

As shares in the companies surged, Robinhood placed extreme limits on how much their customers, mainly younger and small-dollar investors, could buy. The company narrowed that list Monday from about 50 to eight.

Investors who had met up online, in particular on Reddit’s WallStreetBets forum, snapped up shares of the companies, forcing some institutional firms into losses. The moves set off a vicious round of volatility on Wall Street that saw the Dow industrials lose close to 3%.

Robinhood and other brokers are required to meet certain deposit requirements from trade clearinghouses. Because of the heavy trading volume, Robinhood said last week it had to impose the restrictions because deposit requirements set by its clearinghouse were much greater that expected.

“We had no choice in this case,” Robinhood co-founder Vlad Tenev said in an Clubhouse discussion with Elon Musk late Sunday Pacific time. “We had to conform to our regulatory capital requirements.”

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To: Glenn Petersen who wrote (156)2/1/2021 10:15:41 PM
From: Thehammer
   of 178
 
Cowboys. Presumably, they have changed out their legal team. It will be interesting to see how they fare now that they have attracted the attention of our bottom-feeding, attention-grabbing Congress critters.

I guess you have to blame someone. Changing out the legal team though can be a tough transition.

Some of this has been going on forever. Even before the internet - frenzies developed around certain securities and they got bid up to oxygen deprived levels. You didn't have short hedgies on the other side though.

I never quite got the differentiation of Robin Hood as zero cost trades are available all over.

May you live in interesting times!

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From: Glenn Petersen2/25/2021 8:17:09 PM
   of 178
 
Robinhood is still on track for a hot IPO despite the GameStop uproar

PUBLISHED THU, FEB 25 20217:05 AM EST
UPDATED THU, FEB 25 202111:00 AM EST
Maggie Fitzgerald @MKMFITZGERAL
Kate Rooney @KR00NEY
CNBC.com

KEY POINTS

-- Robinhood’s user growth, brand recognition and valuation appear to be stronger than ever despite the GameStop trading chaos.

-- The free-trading app gained 3 million users last month alone, according to estimates from JMP Securities and demand for its pre-IPO shares is high.

-- “Despite some positive and negative press, everyone in the world knows who Robinhood is. They couldn’t have better free advertising,” said Rainmaker Securities’ Greg Martin.

Robinhood’s user growth, brand recognition and valuation appear to be stronger than ever as the online brokerage recovers from the GameStop trading chaos.

Demand for Robinhood shares in private markets is surging as the start-up likely benefited from headlines and mentions by politicians and celebrities. Robinhood added gained 3 million users last month alone, according to estimates from JMP Securities.

“From a brand recognition perspective, who doesn’t know who Robinhood is?” said Greg Martin, managing director and co-owner at Rainmaker Securities. “Despite some positive and negative press, everyone in the world knows who Robinhood is. They couldn’t have better free advertising.”

The company, which pioneered zero-commission trading, is still seen as the main gateway for young investors to access the markets. It is expected to go public later this year amid strong demand for fintech stocks such as Affirm, which had its IPO on Jan 13.

Bids for Robinhood’s pre-IPO shares spiked during the GameStop mania last month, according to Rainmaker, which provides financing for shares of private companies. Demand also rose after Robinhood CEO Vlad Tenev testified before Congress last week. It’s also the most bid-upon stock Rainmaker sees in the secondary market right now. The demand surge could be seen as a vote of confidence for Tenev as he navigated a public relations disaster.



These bids are not guaranteed, but they tend to be a good proxy for investor interest in companies at a certain price. One of the most recent bids for Robinhood shares came in at $52 per share — up from around $15 per share in September.

Private market valuations are often opaque. They are based on outside investments as a percentage of the company. They can also be hard to calculate without knowledge of a start-up’s assets and outstanding shares. But based on that pop in bid prices, one investor told CNBC that Robinhood’s valuation could be as high as $40 billion — more than triple its last publicly disclosed number.

“With the amount of capital they now have, I expect the company will be the dominant brokerage going forward, and I think the market will acknowledge that,” said Martin, who is also the founder of Liquid Stock. “The valuation could be very large in the very near future which bodes well for an IPO.”

Robinhood declined to comment on its IPO timing and valuation.

The Silicon Valley start-up found itself in the middle of a firestorm last month amid the short squeeze in GameStop, which was partially fueled by Reddit-driven retail investors. At the height of GameStop’s surge, the millennial-favored brokerage restricted trading of certain securities due to increased capital requirements from clearing houses.

Demand from Silicon Valley

Robinhood’s decision to restrict trading was met with outrage from traders online. Still, its private investors flocked to back the company. Some venture capitalists responsible for the $3.4 billion in emergency capital cited the app’s ability to add customers amid the trading turmoil.

Three of Robinhood’s private investors said there was “strong demand” to get a piece of the company, even as it stared down a public relations and regulatory crisis.

The financing came in the form of convertible debt, sources said. That debt will convert to equity when the brokerage goes public, and those investors will get a 30% discount on the market price. One venture capitalist told CNBC he and fellow investors believed the company would go public soon, and the debt round was a chance to “get in at a discount.”

JMP Securities analyst Devin Ryan estimates Robinhood’s total accounts are now closer to 23 million, including the 3 million gained in January and 10 million users added in 2020 as investing from home boomed during the pandemic.

Robinhood’s Tenev told Congress last week the company had delivered more than $35 billion in realized gains to investors, which implies big growth in customers and customer assets. Its average account size is about $5,000, the company said.

Tenev, who co-founded Robinhood eight years ago, answered questions from members of the House Financial Services Committee for more than five hours last Thursday. The Robinhood chief was tempered in his responses, and calmly explained that the billions in cash injections were needed to prevent a liquidity crisis from happening.

One investor, who asked not to be named because company strategy was private, said Tenev’s testimony “went well” despite being “painful to watch at times,” due to varying degrees of understanding of Robinhood’s business model from those in Washington.

“Robinhood emerged from this — there certainly was a hit on the company but we’re fully committed to working through that,” the investor said.

Another investor told CNBC that Robinhood backers “are feeling pretty good” about Tenev’s performance. After 48 hours of the GameStop saga, he said it was clear the Twitter backlash was “insular” as the company continued to add hundreds of thousands of new accounts that week.

“Growth has been great, despite Robinhood taking the brunt of press and questions from Congress —Vlad’s done a great job, and as good as he could have done given the situation,” he said. “He was sitting at the nexus of potentially pissing off regulators, customers and competitors.”

Some analysts say new regulation could hinder the legal, but controversial, practice of payment for order flow, hurting the IPO’s prospects. However, Robinhood investors say its value lies in user engagement, not the revenue model. Investors pointed to its position atop the Apple app store, even as it was restricting customers from trading certain stocks.

“It’s the fastest growing consumer app, and has better engagement than social media,” another investor told CNBC. “The majority of those new traders won’t be trading GameStop.”

Robinhood users ... investing in Robinhood?

Some critics, most notably Barstool CEO Dave Portnoy, believe Robinhood’s brand — built on democratizing investing — won’t survive the GameStop trading halts.

However, many expect retail demand for Robinhood’s offering to be strong, given it’s the vehicle that lets rookie investors access the stock market with little friction.

Robinhood could hit the public markets by way of a direct listing or through a special purpose acquisition company, people familiar with the private dealings told Bloomberg News. It has also reportedly considered allowing investors on its platform to invest directly in the Robinhood IPO.

Airbnb followed a similar playbook by offering shares to their hosts, and the stock more than doubled in public-market debut because of retail participation. Snowflake was another stock that surged on its first day of trading, which some speculate was due to much higher-than-expected retail demand for the name.

With a public debut in mind, Robinhood is now talking about the future of the investing boom it helped spark. Some analysts have floated the idea of Robinhood launching more banking products, or even mortgages, on the millennial-focused app.

The future may also involve more brokerage firms combining stock trading and social media into their platforms, Tenev told CNBC’s Andrew Ross Sorkin at the Dealbook DC Policy conference this week. Brokerage firms SoFi and Public already offer this feature.

As for what happened with GameStop, Tenev called it a “5-sigma” event — meaning it had about a 1 in 3.5 million chance of occurring. Robinhood should have enough capital now to deal with regulatory requirements associated with frenzied trading, he said.

But the GameStop volatility doesn’t seem to be going away. Investors poured back into the video game retailer on Wednesday, sending shares up more than 100% at one point.

— with reporting from CNBC’s Crystal Mercedes.

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