Robinhood set to go public
Yahoo Finance's Myles Udland, Julie Hyman and Brian Sozzi break down what investors should expect when fnancial services company Robinhood goes public.
Video transcript
MYLES UDLAND: Welcome back to Yahoo Finance Live on this Thursday morning. A lot going on, but perhaps none will have the masses interested more than Robinhood's market debut. Recent headlines suggesting the stock has indicated to open at $42 per share, this after Robinhood priced its IPO last night at $38 per share, bottom end of the range, giving the company a valuation just north of $30 billion.
Now we are still expecting that it will take some time, as is often the case, as is always the case, with highly anticipated IPOs for the stock to begin trading. Folks have to build the full book, match every buy with every sell, to get trading going. 42, indication. One suspects it'll go higher. We have our little pool, Julie, on where we think the stock--
JULIE HYMAN: Yes, we do.
MYLES UDLAND: --will close. We can save our disclosure-- well, tomorrow, we'll circle back, and we'll let everyone know--
BRIAN SOZZI: If I win, I'll tell everyone.
MYLES UDLAND: --who was-- yeah, who was closest there. Now I think what's a big part of this story-- we talked about the metaverse with Facebook earlier-- there's a meta element to the Robinhood story of them going public, given that it was their platform that I think really, you know, lit the fuel-- created the fuel that lit the fire that started the entire retail meme-- reshaping the market, we could say-- that has happened so far this year. And so now to see shares of this company come public is sort of-- it's full circle, even though it's only been seven months.
JULIE HYMAN: Well, what's also interesting is, it was not a foregone conclusion that the IPO was going to happen at one point, right? When they sort of-- when we were seeing the meme stock turmoil happening, when a lot of their users were upset with them over the halt of GameStop trading because of the T plus 2, you know--
MYLES UDLAND: They had to raise capital.
JULIE HYMAN: --that it takes time for execution of various trades. And they had to raise capital, indeed. And we've sort of seen the maturation. Like, it's so interesting when we have these startup companies, where you see the maturation of it and of young executives before your eyes. Vlad Tenev, of course, the CEO, being grilled before Congress, being grilled by the media, at one point, doing quite a lot of media to try to explain what the company had been doing.
He's 34 years old. The guy is going to be a billionaire. And, you know, sort of seeing him go through the wringer-- I mean, we've seen that with other companies. We've seen that with Facebook, a young executive sort of growing up before our eyes. That's an interesting process to me as well.
MYLES UDLAND: [INAUDIBLE] another one.
JULIE HYMAN: Yeah.
BRIAN SOZZI: Yeah. Also interesting, too, like we've been talking about all week, this IPO is coming at a good time for Robinhood because of the bounceback in crypto. So I wouldn't be surprised if why you're seeing this higher indication here in the early going. The last indication I had, about 42. As you mentioned, Myles, up 11% from the pricing price. But crypto has rallied back. And I am unsure if it would still-- it would be getting this type of pop if crypto was down around 30,000 and indicating maybe 28,000 or even below that.
MYLES UDLAND: Yeah, and I think, again, just to pull some key numbers that we have and we see here, $522 million revenue in the company's second quarter. When they filed their S-1, 17.7 million active users, monthly active users, 18 million funded accounts. That's now up to 22 and 1/2. And I think what's most important here, more than 50% of Robinhood customers are first-time investors.
And so the question for the company going forward is, can they continue to pull from-- research will vary, but let's call it at least half of Americans who do not own individual stocks outside of retirement plan. Can the company continue to pull from that? Or do they endeavor to find new ways to make money from their customers, other than options trading, which is the large, the vast majority of where they're getting their revenue.
And options trading, of course, requires a risk-on market. It requires investors, customers, let's call them, who want to see ever increasing returns, who have a higher risk tolerance. But will they? And our discussion prior about Vanguard and Fidelity and all these other more staid and established folks, will they continue to try to encroach on that space, or are they comfortable with where they're at? Because the growth-- the growth makes it a completely different company today than it was two years ago, to your point about getting-- even getting to the IPO, right, Julie?
JULIE HYMAN: Right. Now the indication is for $40. Already, it's moved down $2 from-- I mean, but this process can take a while, right? And we're going to get a lot of indications probably before the stock ends up opening up, especially such a high profile opening like this. We heard earlier that the NASDAQ, of course, is babysitting this one pretty closely, as you might imagine.
You know, something else with Robinhood that we don't talk as much about is not just the competition from the existing older players out there, but also, there are a lot of other startups out there. There's the Webulls and Public, whose CEO we talked to, a lot of these other companies that are trying to--
MYLES UDLAND: eToro.
JULIE HYMAN: eToro.
BRIAN SOZZI: [INAUDIBLE].
JULIE HYMAN: Right? That are trying to do what Robinhood does. And, you know, maybe they have first mover advantage. They certainly have name recognition that a lot of these other companies don't. But it's not a given that Robinhood is going to be the one that-- maybe it is.
BRIAN SOZZI: And there are also other crypto trading platforms, too. You have Coinbase. We talked to one this week, Epiphany, another crypto trading base. And to what extent, as they grow, will they take some of these Robinhood customers?
MYLES UDLAND: Yeah, I would just say that if our present world teaches us anything about the power of brand--
JULIE HYMAN: Mm, mm-hmm.
MYLES UDLAND: --we as a society have a high acceptance and tolerance of their being one.
JULIE HYMAN: That's true.
MYLES UDLAND: You know? And I feel like Robinhood has a-- from a branding standpoint, some of the branding, it's not all good, but--
JULIE HYMAN: Fair.
MYLES UDLAND: --it's not all good for Facebook either--
JULIE HYMAN: Yeah.
MYLES UDLAND: --a trillion dollar company. So we'll see how that evolves. And of course, the how you-- you know, the multiple of users, what's each user worth, so on and so forth.
JULIE HYMAN: The other thing that we haven't talked as much about today is the regulatory risk. And they came out with a filing earlier this week, right, that they had a request from FINRA. It's compliance with registration requirements per personnel. I'm not quite sure-- do you guys know what that was all about?
MYLES UDLAND: As far as I understand, Vlad Tenev, the CEO, is not registered, doesn't have licenses as a securities dealer, as a broker.
JULIE HYMAN: Is that OK?
MYLES UDLAND: I mean, FINRA's asking if it's OK. I think that's the conversation they're going to have.
JULIE HYMAN: Gotcha.
MYLES UDLAND: Is that OK? You know, because he's running the company.
JULIE HYMAN: He's a tech guy.
MYLES UDLAND: He's obviously not selling the stock, but, like, on the farthest edge of a logical argument, he is selling stock because he runs a company that offers the platform at the same time.
JULIE HYMAN: Do all of the CEOs of all of the brokers have those licenses?
MYLES UDLAND: That's a great question. I don't know.
JULIE HYMAN: I have no idea.
MYLES UDLAND: I don't know.
JULIE HYMAN: Like, you know, does Adena Friedman have--
MYLES UDLAND: Is Thomas [INAUDIBLE] a registered broker?
JULIE HYMAN: Or an exchange, an exchange owner, do they have to have these licenses, too? I don't know.
BRIAN SOZZI: Do a little digging on that one.
MYLES UDLAND: Do a Yahoo U on this.
JULIE HYMAN: Yeah.
MYLES UDLAND: I-- honestly, I don't know. But that is--
JULIE HYMAN: Like, did Jack Bogle have--
MYLES UDLAND: I think that's a conversation.
JULIE HYMAN: You know, I don't know.
MYLES UDLAND: Some point, probably. Right?
JULIE HYMAN: Yeah.
MYLES UDLAND: Anyway.
JULIE HYMAN: Anyway.
MYLES UDLAND: Let's go google that, see if we can come up with some answers.
