Investment has been completed on Feb 14, 2022
- Net profit
Robinhood created one of the most popular commission-free investment mobile applications. The company’s stock drops amid the fading “meme stock” craze and broad tech stock correction. For the first time our team invested in Robinhood in July 2019. On February 14, 2022, the investment closed with -17.7% result.
Robinhood is a SEC registered broker-dealer. Due to its commission-free model, customers see Robinhood as a force to reckon with in financial markets and actively promote the company through word of mouth.
As of December 2021, the platform has nearly 22.4 million loyal users on board. It is especially popular among millennials who adopted the company as their first brokerage thanks to its no-fee-trading and usability features.
The financial markets in the U.S. are the largest and most developed ones in the world. In 2020 the capitalization of the U.S. stock market was $41T or 44% of the global stock market. For the past 10 years, the U.S. stock markets have grown by more than 3 times, with a compound annual growth rate of 13%.
The company has great growth potential among its main target customer as only 25% of the 72 million American millennials have Robinhood accounts. In addition to the growth in new users, the amount of capital invested is expected to increase as net earnings and savings grow rapidly at this stage of millennials' lives.
Robinhood is evolving from a discount stockbroker into a complete financial platform that can serve all the financial needs of the customer, including loans, insurance, etc. Robinhood successfully competes with Charles Schwab, Webull, Fidelity, Interactive Brokers, and others.
The company diversifies its business towards more innovative financial areas like cryptocurrencies. Its Robinhood Crypto allows users to invest and trade cryptocurrencies 24/7 and commission-free and as the crypto market is gaining momentum, the company benefits from this lucrative trend. In December 2021, Robinhood rolled out a feature that allows customers to transfer assets from other brokerages into Robinhood (ACATS) and in January 2022 – a public beta for crypto wallets.
We bought Robinhood stock at $15.2 in July 2019. The company held an IPO on the NYSE on July 28, 2021. Robinhood's stock opened at $38, at the lower end of the range, valuing the company at about $32B.
Over the past few quarters before the investment was complete, the company’s financial performance had been erratic, largely due to the craze of meme stock and crypto trading. The tumult in tech stocks also had a negative impact on the dynamic of Robinhood shares.
On February 14, 2022, the investment in Robinhood’s shares closed at $13.10, with -17.7% result.
Robinhood users 2021, Statista, October 2021
Total Market Value of US Stock Market, Siblis Research, September 2021
Market capitalization, Wikipedia, September 2021
"Robinhood Markets, Inc. Earnings Presentation Fourth Quarter 2021", Investor relations website, Jan 2022 (pdf)