The trading app Robinhood has inspired a younger generation to speculate on the stock market – and not only made friends with it. Now the company is going public in New York.
Your IPO should stir up the financial industry. Robinhood boss Vlad Tenev and his team are streaming their mantra into the world of small investors from a white sofa under potted flowers. The broker platform wants to give them a voice – and make the top dogs of Wall Street sweat: “We believe in making the financial market democratic for everyone,” says Tenev. “And together we will change Wall Street forever.”
Does the younger generation also support the IPO?
For this, however, Tenev and his business partner Baiju Bhatt need their customers: a generation of young private investors who found their way into fast stock trading through their free broker app. There are currently around 22 million users, on average younger than 30 years. Now they should invest long-term – in Robinhood shares.
The so-called neo-broker is doing something that has never existed before: it reserves a good third of the securities for its users at the issue price, explains Tenev: “For years, most small investors could only buy into an IPO when the institutional investors already had shared at the starting price and then the price had already risen. ” It is different with Robinhood: “With us, everyone can get on at the same time – without a minimum.”
The goal is two billion
Under the symbol “HOOD”, the neo-broker wants to sell 55 million shares on the Nasdaq tech exchange – in a price range of 38 to 42 dollars. The company wants to collect the equivalent of around two billion euros. In order to then expand beyond the USA, says Tenev, who was born in Bulgaria himself. “As immigrants and children of immigrants, this is important to us: we want to spread the Robinhood pen all over the world,” he explains. “And we believe the investments we’ve made in our infrastructure over the past 18 months will enable us to expand internationally.”
The two Stanford college friends Tenev and Bhatt founded Robinhood in 2013 – as an app that amateurs can use to trade stocks, options and, in the meantime, cryptocurrencies with a swipe of the screen. Now they have a so-called “single money app” in mind: with pension savings plans, payment services, and their own wallet for digital currencies. Tenev has the young users in mind: “Many of them are certainly not thinking about retirement. But we want to get them to plan for the long term so that they are better off when they are older than their parents.”
Flash mobs and bulk purchases
They have already demonstrated what power the “Robbinhooders” have over such mobile phone apps. They arranged to meet over the Internet and brought the stock market into a tailspin with flash mobs. They drove up the stock value of troubled companies through bulk purchases and made a long nose for hedge funds. Because they had bet that the shares would go down. Small investors won – hedge funds lost billions. Robinhood’s image remained tarnished in the financial world.
Analysts on Wall Street were skeptical of the ambitious IPO, says Rohit Kulkarni of investment advisor MKM and predicts: “It will be a cumbersome sale.” Robinhood’s strategy is too vague: On the one hand, the company wants to turn its users into long-term investors. On the other hand, it encourages its customers to do a lot of risky trading. “On the one hand, there is a conflict of interest,” said Kulkarni. “On the other hand, there is a lack of clarity and transparency.”
On Wall Street, many are wondering whether a simple gamer platform is not operating under the noble Robinhood cap. Old professionals such as star investor Warren Buffett criticize the fact that the app promotes a “casino mentality” through its playful orientation and induces young people to risk money. A generation conflict says Robinhood boss Tenev and looks at the stars: “At the moment we are getting a particularly good view of Venus here in North America.” After all, he is also an amateur astronomer, says the avenger of small investors.
