“What’s your favorite planet?” is a real question that Robinhood executives actually chose to answer during the Q&A section of the private investor roadshow.
“Definitely Pluto,” says long-haired CEO Vlad Tenev. She’s having fun. He explains that tonight after sunset there is a magnificent view of Venus.
Many of the questions chosen by management have been clumsy; asked if Robinhood adds a customer support line, Tenev happily explains that one already exists. Another question is wasted on whether the shares pay dividends – anyone read the brochure know the answer is no.
I watch this roadshow – the first and I doubt the first of many viewers – because Robinhood is going to sell up to a third of their IPO its users. The roadshow is part of a plan to place private investors on an “equal footing” (according to the prospectus) with institutional investors. At the top of the presentation, I am told that this is basically the same set of material that institutional investors receive.
And why am I spending my Saturday here? Well, it’s going to be the first meme IPO. And if that works, other companies can choose to increase their stakes, which they distribute to private investors, says Robert Le, a senior analyst at Pitchbook. Most of the IPO will only distribute 1 percent to 3 percent of its shares to private investors, he says. If Robinhood decides its first trading day higher than it started, other companies can follow in its footsteps. However, if stock performance declines, institutional investors can avoid IPOs involving a large number of retailers, Le says in an email.
Robinhood has not previously offered its investors an IPO, and this applies to David Erickson, who was Barclays ’global leader in global equity markets until his retirement in 2013. (He is now a lecturer Wharton Business School, University of Pennsylvania.) “They don’t have the best internal controls,” Erickson says in an interview, point History of Robinhood interruptions. “For a company that’s supposed to keep their money safe, they may not do good at it.”
During the roadshow, Tenev, his founder Baiju Bhatt – who also rocks shiny locks – and CFO Jason Warnick seem to be in an expensive and inconvenient living room fax machine. They sit on a white couch, with occasional wooden slats behind; the plants hang from the slats. In front of them are small wooden tables. Bhatt and Warnick clearly read about teleprompters. Many of the speakers on the call had a pin on the Robinhood feather logo – but not Tenev.
Eventually, real, substantive questions arose. While Robinhood doesn’t provide a timeline, it apparently seeks to create wallets for its cryptocurrency users so they can move their encryption elsewhere. Eventually, there will be a beta, but because the cryptocurrency is impossible to recover if it is mishandled, Robinhood progresses slowly, Tenev says.
And when it comes to order flow, which accounts for 81 percent of revenue in the first quarter of 2021, Robinhood plans to address concerns with regulators. This sounds suspicious as Robinhood is going to operate in the lobby – and it may also explain it former SEC employees were hired by Robinhood. What comes to angry meme stock customers who might leave? Tenev dodges the question. Breaks? Well, Robinhood says it is investing resources in layoffs so they don’t continue. (Wait and see!)
The most interesting notes are saved to the end. First, Robinhood is considering the IRA and the Roth IRA, two types of retirement accounts, as products it can offer. (Do people want to save for their retirement fun gambling app is an open question, but sure!) Second, Robinhood thinks private investors are in the market to stay; it seeks to diversify by building Robinhood Gold, its paid product, as well as cash management, more cryptocurrency offers and fully paid securities loans.
There is one major shortcoming in the roadshow. Despite the love of democratizing the financing of its pigeon mission, the Series B shares of the founders will receive 10 votes per share, while the Series A shares of IPO investors will receive only one vote per share. Erickson, Wharton’s lecturer, also doesn’t like it. “This bothered me like WeWork bothered me,” he says.