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Robinhood IPO 2021: The Case for Finally Going Public this Year - YouTube
Channel: Healthy, Wealthy, and Wise
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a lot of us are expecting a robin hood
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ipo in 2021
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but will it happen today i'll take a
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look at what we know so far
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and why this looks to be the year robin
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hood goes public
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welcome to the healthy wealthy and wise
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channel where we focus a lot on ipos
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in fact in december we had a preview of
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seven companies that we expected to come
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out in early 2021
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and as of right now three of them went
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public last week and two more are set to
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go public in february
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and that's not to mention that every
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week we have our featured ipo this week
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episode
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where we talk about all the companies
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that we know are going public for the
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upcoming seven days
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it's really just a great way to stay up
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to date on all the ipos coming out
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now today we'll be focusing exclusively
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on robinhood a company that's been
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rumored to go public for the last couple
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of years
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but now based on a lot of factors and
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reports and ipo seems more eminent than
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ever before
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and i'll share some of those reasons
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with you now for many of you you've been
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with me for a while
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and as always i want to thank you for
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sticking with me and for those of you
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here for the first time
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my name is kevin and if you're into
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staying on top of all the companies
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hitting the market
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this channel might just be what you're
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looking for so definitely consider
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subscribing and turning on the
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notification bell
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that way you won't miss any videos as
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soon as they come out
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now keep in mind that the information
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this video is meant to be informative
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and any opinions i share are completely
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my own and therefore this video should
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not be viewed as providing financial
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advice
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you should always do your own research
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or consult with your own financial
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advisor when making any investment
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decision
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so today i wanted to share some
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information on the company that a lot of
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people in the community have asked about
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going public
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and that of course is robin hood and it
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makes sense because a lot of you use the
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platform yourselves
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like it and of course a lot of people
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just like the idea of investing in a
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company
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that they use and find value in but they
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also see the company as one that has a
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lot of growth ahead of it
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fueled by a younger demographic leading
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the charge particularly millennials
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the company has made cnbc's disrupter
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list multiple times
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and with good reason they've helped
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revolutionize online trading by not
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charging commissions which has led to
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many other brokerages to follow suit
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impressively with our over 13 million
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accounts robin hood has muscled their
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way in less than a decade to make
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household names like charles schwab
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fidelity and vanguard completely adapt
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to their commission free pricing model
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while the robin hood ipo would not
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likely be one of the biggest money deals
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for a possible 2021 offering
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it could be one of the most sought after
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ones at this time there are a lot of
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unknowns about an offering
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but there are definitely a few things
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out there that have been reported that
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lead to a likely ipo of robin hood stock
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happening this year
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let's first talk valuation and how the
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hot market environment has powered it up
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as the company benefited big time from
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the pandemic adding about 3 million
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accounts in just the first quarter of
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last year alone
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robin hood looked to capitalize on the
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moon to their business by holding some
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fundraising rounds last
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year over the summer david french and
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reuters reported that the company had
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raised 660 million dollars to win the
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most recent round
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which raised the company's valuation to
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11.7 billion dollars as of september
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up from a valuation of 8.6 billion
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dollars from another round of
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fundraising just a couple of months
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earlier
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and in that same article it was
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estimated that robin had raised a total
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of 1.25 billion dollars in 2020 alone
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with business good from a booming stock
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market and investors eagerly coming on
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board in the private markets
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for those reasons alone the timing for a
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sooner than later robin hood ipo
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makes total sense and piggybacking on
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top of that
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we've also had reuters published another
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article in december reporting that
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robin hood is settled on goldman sachs
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salinas preparations for a 2021 ipo
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although that was qualified by a common
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statement of a robin hood ipo date being
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subject to market conditions so no
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definitive timetable was given
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other than saying that the expectation
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was for it to happen this year
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also in that report sources reported
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that the value of the company at the ipo
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could be around 20 billion dollars which
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would be almost double to where it's
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currently valued
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as they say strike while the iron is hot
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and speaking of strike
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how about striking that like button if
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you're enjoying this video it's super
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important in letting me know that you
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want to hear more about a robin hood ipo
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plus it really helps a channel with
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youtube when it comes to pushing the
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video out to more people
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and that's equally important because the
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more we can grow the community with your
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help the more time i can commit to
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putting out the content you want to see
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so really appreciate your help in making
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this channel successful
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all right let's get back to robin hood
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so before i talk about another report
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where robin hood stock should be
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publicly available
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in 2021 which also happens to be the
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most recent one
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i think it's important to talk about
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some of the headwinds against the move
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or things that have likely slowed them
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down now robin has had a share of issues
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in the past
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including things like neurologists last
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march a botched attempt to watch new
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checking and savings products in 2019
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that brought in regulators
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data breaches in the past year and the
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negative pr of a young trader killing
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himself last summer
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due to a lack of clarity of his actual
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account balance
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but today i just want to mention the
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more recent ones that may have impacted
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an upcoming robin hood ipo
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a couple of the big ones were summarized
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nicely in an article by ave salesman on
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barons in december
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the first issue was the secretary of
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massachusetts suing the company
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with accusations of violating the
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state's fiduciary rule
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which says that brokers owe a duty of
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loyalty to their customers
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the complaints that robin hood enticed
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inexperienced investors to make risky
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trades so it could profit off a trade
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execution
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these claims against robinhood aren't
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new but the formal lawsuit in place
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saying that the company doesn't care
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about its users
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isn't optimal to have to deal with when
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preparing to go public
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robin hood has denied the allegations
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instead of planned to vigorously defend
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itself
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while the charges could be hard to prove
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as mentioned in the article
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what could be problematic from a legal
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sense are claims that robin hood ignored
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its own options approval rules
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not following your own rules or policies
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is always a target for regulators
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the company responded that has since
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quote made significant improvements to
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our options offering
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adding safeguards and enhanced
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educational materials end quote
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so that's one headwind the other one in
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the article was news on robin hood
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settling scc claims that it had misled
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customers about how it makes money
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reportedly and i'm reading this directly
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from the article
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the sec said that from 2015 to 2018
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robin hood was more focused on getting
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large payments from market makers than
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on getting good trade execution
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so much so that the poor prices its
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clients got sometimes completely
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outweigh the benefits they received from
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free commissions
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as typical in settlements robinhood
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didn't admit to or deny any wrongdoing
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but did pay 65 million dollars to settle
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the case
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now the issue here is the basis of how
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they were able to disrupt the market and
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offer trades commission free in the
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first place
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and still make money what robinhood does
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is pay for order flow
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which is a legal practice that involves
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taking a cut of the profits market
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makers earn
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by executing robinhood client trades
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according to salzman
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other brokers also make money this way
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but tend to rely on it for much less of
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the revenue
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at robinhood it makes up the majority of
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revenue up to as much as eighty percent
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of it
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while as a comparison at charles schwab
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that number is two percent
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while paying out 65 million dollars
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can't be really seen as a positive
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what is is that the sec issue is no
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longer hanging over them so they can put
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it in the past and move forward with
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their ipo
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now one other interesting piece of
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information from this article
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particularly when you want to start
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getting an idea of where the company
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should be valued at
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is that while robinhood doesn't disclose
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revenue or profits
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security filings indicate that the
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company made less than one billion
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dollars in revenue last year
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and may fall short of that number this
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year as quoted from the baron's article
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when asked earlier this year if the
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company is profitable the chief
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financial officer said that robin hood
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was
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investing heavily in our company so our
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costs are going up quite a bit
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along with our revenues as we grow now
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public perception aside
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the bigger consideration going forward
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is how can robin hood grow revenue
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beyond order flow
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whether the process gets more regulatory
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scrutiny or not the company needs to
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diversify in other ways to make money
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where
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they don't alienate their customers that
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have come to them primarily for the low
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cost by starting to charge fees
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my guess is instead of doing that they
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will look at adding more features or
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personalized consulting services going
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forward
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since many of their account holders are
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new to investing coming in after the
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market crashed in march and have yet to
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significantly deal with dropping prices
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these kinds of services could prove
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popular once a significant correction
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occurs
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right now many new investors are feeling
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pretty good about themselves because
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things have been great overall in the
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market for the past 10 months
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but that will be tested when that
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correction comes and it will you just
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never know when
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i can tell you i felt the same way in
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the late 90s but after the bubble burst
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many people got out of the market after
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taking big losses and didn't come back
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well i was lucky not to take any big
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losses myself the experience definitely
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made me more cautious and gun-shy and
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pulling the trigger on individual stocks
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what robinhood can't afford to happen is
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to have a significant portion of their
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core demographic leave
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when the next downturn happens in
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premium support services
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might be the answer helping the company
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generate additional revenue
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and keeping their account holders on the
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platform
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all right so let's get to another piece
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of evidence that there will be a robin
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hood ipo this year
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and this is the most recent one as of
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this recording
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now i want to preface this evidence by
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saying if you've watched me on some of
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my live streams
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i've said that of all companies i
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believe robin hood is the one that
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should go public by direct listing
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i mean here's a company that was founded
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to basically give a middle finger to the
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established players in the industry
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and it has the name robinhood of all
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things a character known for robbing
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from the rich to give and help the poor
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if robin hood were to go public with a
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traditional ipo
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we could expect to see the same story
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play out that happened with snowflake
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and airbnb
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the big institutional investors on wall
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street will buy all the ipo shares at
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one price
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and then the next day be able to sell
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them to ordinary people for more than
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double the price they paid for their
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shares of robin hood stock
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how robin hood like would that be now
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the issue until recently was that with
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direct listings
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a company couldn't raise new capital and
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that's something that robin hood was
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obviously looking for
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however that can now happen as the sec
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recently approved a rule change that now
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allows companies to have the ability to
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raise capital at a direct listing
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now keep in mind this is yet to be done
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by another company so there's always a
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hesitation in doing something first
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without having an idea of how it will go
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in the real world but hey
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this is the robinhood that went into the
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unknown of not charging commissions on
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trades right
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now they also have the option to do what
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roblox is doing which is to go with a
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direct listing
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after holding another private round of
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fundraising but at this point there is
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no indication that robinhood is looking
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to explore the direct listing
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which as i just mentioned they've
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already selected goldman sachs to lead
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traditional ipo
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all right forgive me for my rant now to
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the actual news in an article on
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bloomberg written by matthew monks and
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scott devoe on january 7th
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it was reported that robin hood was
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considered in selling some of its shares
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directly to its own users when it goes
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public this year
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now that's significant and a way for the
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company to help save the disruptive
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reputation that i was just saying that
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they might be tarnishing by holding a
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traditional ipo
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now the article does say would be
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allocating what they call
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a significant minority of the shares
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that will list to its own clients
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but the authors also note that no final
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decision has been made on how much stock
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it might sell to its own customers
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or if robinhood will even proceed with
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the plan if this were to happen it would
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be huge
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as a portion of their own account
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holders could actually get robinhood
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stock at the ipo share price
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which is i've said many times as
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difficult for retail investors to get a
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hand on
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obviously if this does happen the devil
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will be in the details so we need to see
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what they put into their s1 filing to
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figure out how much of a game changer
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this could be
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when that filing comes out i'll
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definitely dig into it and put up
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another video what information is in
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there that you'll want to know
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the last juicy part of that article was
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at a robin hood ipo could
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again could come as soon as this quarter
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another piece of evidence that they are
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likely to go public this year of 2021.
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if that is the case then we should start
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hearing reports of robin hood filing
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confidentially soon which as of yet i'm
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not aware of that happening
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but as soon as i do hear something i'll
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definitely share it with you
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if you don't want to miss it remember to
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turn your notification bell on
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so what do you think are you in on a
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robin hood ipo no matter what
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or do you still need more information
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before making that leap let us know what
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you think in the comments
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it'll be exciting to watch the journey
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of robin hood investors being able to
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trade robin hood stock on the robinhood
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platform
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and i'm looking forward to helping cover
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that journey with you so yeah
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there'll be more to come but for now if
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you enjoyed this video
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please like it comment on it and even
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share with your friends on any of your
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social media sites
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that's your contribution to helping me
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grow the channel and something that i
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would be extremely grateful for
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and for those of you here for the first
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time i hope i convinced you to join the
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community on the type of content i
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deliver
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after all it's totally free you just
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gotta press that little red subscribe
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button
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we'd love to have you on board until
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next time
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thank you for watching and have a great
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day
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