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July 29th: Celebrating #HOOD IPO (Robinhood IPO): the good, the bad, and the ugly - YouTube
Channel: Stock Card
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[Greeting]
>> Hoda: Hey fellow Stock Cardians.
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Happy Thursday, July 29th, 2021.
I'm Hoda, Stock Card's CEO,
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reporting to you from a green stock market.
I looked at the market indices that reached
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new highs despite an underwhelming GDP report
and celebrated the IPO of Robinhood (HOOD).
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I dug into the Fintech stock to find the
good, bad, and ugly about Robinhood’s
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situation in the market.
[Overall Market]
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>> Hoda: The market indices
ended the day in the green.
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A report by the Department of
Commerce was released today,
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showing a 6.5% increase in the GDP,
which is lower than expected.
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This could be a sign of struggles
with inventory and supply chains,
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or just a slight pullback in growth.
Regardless of the reasons, investors seemed to
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remain optimistic and brought the indices
to record highs.
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[Get The Daily Market Recap]
>> Hoda: Today I want to talk about
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Robinhood's IPO and research its S1 document.
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But before that, let me thank you
for being a Stock Cardian.
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You watching, reading, and listening
to the Daily Roll episodes and
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using Stock Card platform in your research are
the highlights of our company's success.
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Thank you for being a Stock Cardian!
If you aren't a Stock Cardian yet,
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I'd like to invite you to try now.
First, hit the like button, subscribe to
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the show and then create a free account
on StockCard.io. Thanks for becoming a new
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Stock Cardian!
[New IPO]
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>> Hoda: Before Robinhood's IPO
analysis, I'd like to pause a second
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and celebrate the company’s
Initial Public Offering.
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Robinhood's IPO is in a sense, a celebration of
the entire individual investor community.
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My fellow Stock Cardians, and
even other individual investors
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that haven't found Stock Card yet,
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it’s a big day for you all!
Today Robinhood went public.
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There is so much controversy around Robinhood
and retail investing these days that it casts a
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shadow on the significance of this event.
Robinhood's IPO is a huge milestone for all
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of us who believe in owning
our financial destiny.
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We are passionate about investing. We like the
thrill of discovering new investment ideas,
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and we embrace the responsibility that
comes with managing our money.
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I even dare to say we enjoy it!
Today, we tip our hats to the Robinhood team
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and its 22 million+ users. Congratulations!
[The Good, the Bad, and the Ugly]
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>> Hoda: Now, celebrations aside, it's time to
take a look at the stock and find the good,
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the bad, and the ugly. First up:
The Good:
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Robinhood’s branding is a
large part of its success.
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It is one of the more
prominent fintech companies,
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widely known for its accessibility and
ease of use for retail investors.
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The name Robinhood is practically
synonymous with retail investing,
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and that’s a valuable asset.
In terms of user engagement, Robinhood's zero
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fees model and easy-to-use design have
led to a highly engaging product.
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It has more than 17 million
monthly active users,
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and more than 80% are acquired either
organically or through user referrals.
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The company has grown its revenue
245% year-over-year in 2020,
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and an even greater 309%
year-over-year by this March.
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The company uses rebates from
other financial institutions,
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premium subscriptions, and its own
investments to generate revenue.
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It's a rapidly growing start-up.
Overall, Robinhood clearly understands how to
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benefit from trends and retain customers.
The Bad:
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Pessimism is Robinhood’s greatest enemy. As soon
as the market opened, share prices dropped.
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Although it almost broke even around 1:00 EDT,
it was dragged further down into the red during
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the rest of the session.
By closing time, the price
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had fallen to $34.82.
It seems investors are not
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as excited about Robinhood.
The volatility of HOOD stock
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is worth understanding.
The company kept about 20-35%
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of its shares for sale to retail investors,
which I might add, is quite on brand.
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However, this is higher than most
companies, which according to CNBC,
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tend to keep more of their stock invested
with institutions like hedge funds.
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This allows more volatility, which
investors should be aware of.
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Also, profit-wise, the company
is not quite there yet,
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and may not get there anytime soon.
According to Robinhood's S1 document,
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it "incurred operating losses each year
since its inception in 2013 through 2019,
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including net losses of $6.1 million,
$57.5 million and $106.6 million for
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fiscal 2017, 2018 and 2019, respectively."
The Ugly:
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The sustainability of revenue
is a concern of mine.
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One thing that bothers me about
Robinhood's revenue is how reliant
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it is on options trading revenue, dogecoin
trading revenue, and general hype.
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If you look at the distribution
of revenue on its S1 document,
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the majority of revenue in 2020
comes from Options trading.
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And, similarly more than half are
coming from the 2020 users.
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Coincidentally, the trading of options has also
caused one of the company’s biggest missteps.
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At the end of June, FINRA fined Robinhood
a record $70 million for customers’
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losses during the “outages” like
during the Gamestop (GME) squeeze,
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misleading customers, and for approving
options trading for customers the
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company knew should not be trading options.
Overall, there is a lot of backlash against
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the so-called order flow revenue model.
If that wasn’t enough, the CEO of Robinhood
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is currently under FINRA investigation
as well for not being registered with FINRA.
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This is showing the company in a bad light
at a time where it needs good publicity
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the most, but it seems the CEO Vlad
will not be found in violation,
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since he does not directly oversee the
brokerage, only the parent company.
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This may mean the company has to
find a FINRA-registered CEO so the
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two co-founders can step further
back from brokerage operations.
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Can Robinhood maintain the revenue growth?
That is the question I'm pondering
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as I consider investing in the IPO.
For now, I think I’ll stay out of the fray.
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Good brands and well-managed companies
stay for a long, long time,
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and there will be plenty of
opportunities to invest.
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I won't rush in, and let Robinhood
hash out some of the ugly regulation
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and revenue challenges it's currently facing.
IPO days are some of my favorites.
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It’s exciting to watch a company
enter the world of public trading.
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Want to find all the latest IPOs in one
spot? Type in "2021 IPO" in the search bar,
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and click on the “2021 IPO” collection to
get a list of all the IPOs this year.
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I’ll leave a link in the show notes.
[Freedom Portfolio]
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>> Hoda: Okay, let's wrap up by
stopping by Paul Essen's portfolio.
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You can find it on Stock
Card's Stock Picks page.
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Paul and his Freedom portfolio are the
Featured investor and partner of the week.
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He is one of the best long-term investors
I like to follow on Stock Card.
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He and I had a chat about his investment
strategy earlier this week.
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I’ll leave a link to that
conversation in the show notes.
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Drop by Pauls' Freedom portfolio and follow
him to get notified of his buys and sells.
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[Give Stock Card A Try!]
>> Hoda: That's it for today.
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If you haven't already done so,
please give Stock Card a try,
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research as many stocks
and ETFs as you'd want,
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and consider following a few successful
investors by visiting the Stock Picks page
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on the Stock Card platform.
Don't forget to sign up for a 14-day free
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trial with promo code "rollwithourceo"
all lowercase and in one word.
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Don't forget to like, subscribe and share these
market recap reports with your friends.
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And, come back tomorrow for another market
recap report. See you then.
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