Robinhood IPO: Looking Under The HOOD

Jul. 06, 2021 8:00 AM ETRobinhood Markets, Inc. (HOOD)19 Comments


  • Robinhood’s income is highly dependent on getting retail investors into the riskiest sorts of investments — options, crypto, short selling, and margin.
  • As such, they are highly dependent on the casino-like atmosphere in markets in the last year-plus. Eventually, that will end, and it will not be good for Robinhood.
  • Like all retail brokers, Robinhood sells their retail order flow to market makers. But uniquely, over 75% of Robinhood’s revenue comes from order flow payments.
  • They have next level Risk Factors in their prospectus.

Trading Platform Robinhood Fined 65 Million By Securities And Exchange Commission
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Welcome to the Casino

“[I]f we buy this thing it will go up, so let’s buy it; also it will be fun and Elon Musk tweeted about it.”

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Confirmation Bias Is Your Enemy.

Tech and macro. Deep analysis of long term sectoral trends, and the opportunities arising from them. I promise not to bore you. Author of Long View Capital, a Marketplace service for long-term investors. Risk Factors: I am also wrong sometimes.

Disclosure: I/we have a beneficial long position in the shares of VIRT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Though not one of Robinhood’s top three market makers whom they name, I own shares of Virtu (VIRT), who pays for order flow like all market makers. I was not surprised Robinhood doesn’t use Virtu much (or at all), as Virtu tends to have narrow spreads.

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