"Robinhood Financial LLC is set to be valued at about $5.6 billion in a new funding round, according to people familiar with the matter, a fourfold increase in just one year that reflects the stock-trading app’s soaring popularity among millennials. The Silicon Valley startup is in the final stages of securing around $350 million from a group of investors led by Russian firm DST Global, according to the people familiar with the fundraising. DST led Robinhood’s last funding round a year ago, which valued the company at $1.3 billion. A Robinhood spokeswoman declined to comment. The exploding valuation puts Robinhood among the top 15 highest-valued private technology companies in the U.S., representing an ambitious bet by investors that the firm can capture a sizable piece of the financial-trading market. Robinhood’s three-year-old app has amassed more than four million users—roughly doubling from the prior year—by offering free stock trades that undercut even discount brokers that charge small fees. The question is whether Robinhood can convince enough of its users to pay for premium services, such as “Gold” subscriptions that start at $6 a month for the ability to trade after hours and borrow capital. Robinhood also makes money on interest held in client cash accounts as well as by selling client trades to market makers. As of last year, the median age of Robinhood’s users was around 30, meaning they are less likely to have ample cash in spare accounts to spend compared with older clients at big brokerages. The company is banking that the younger investors’ assets will grow over time, and that it will be able to sell them additional services. Robinhood has sought to keep costs low by shunning marketing and reducing overhead. Investors also see opportunity in Robinhood’s recent introduction of trading in cryptocurrencies like bitcoin, according to a person familiar with the investment. Those trades are also commission-free. At about $5.6 billion, Robinhood is already valued at a third of E*Trade Financial Corp. , which has a market capitalization of $15 billion. For investors in this latest round to earn a solid return on their investment they will be betting that Robinhood can approach that valuation. Robinhood was founded in 2012 by two 20-something Stanford University math graduates, Vladimir Tenev and Baiju Bhatt. Now in their 30s, the founders have said they were inspired by the Occupy Wall Street movement in 2011 to make financial services accessible to everyone regardless of income." from wsj
How does Robinhood make their money? Most non-commission brokers make theirs on a "wider than market" spread.
How is Robinhood's spreads on the quotes and fills on the trades. If they are making up for no-commissions via having bigger spreads or bad fills then it is not worth it. Trick is they can program their softwares to give 5 excellent fills and 6th trade a bad one to make up for the lost revenues on early fills. Care for animals........https://animalaidunlimited.org/
That's like asking banks what they think of cryptocurrencies, you're not going to get an honest and objective answer are you.
Not the same, I think. Brokers have to make money somehow... fees of some sort, commissions, spreads, markups, kickbacks, etc. As a customer you should know how they make their money and determine whether it's reasonable and acceptable to you. You ain't gettin' nothing that's completely free... nobody can stay in business and provide services without compensation of some sort. Just like trading stock index futures. We have to pay the exchange to provide the data... we have to pay the broker/software company to provide the platform to trade the data the exchange provides. You can't trade the market without both of those, and they need to make money to stay in business and continue to provide their service for you to be able to trade.
It has to be Maker/Taker, PFOF and/or stock loan.. Spreads can't really be worse because of ITS trade thru rules. A couple of the guys on our desk use them for their personal accounts and they are pretty savvy successful traders. They claim when they split order their fills are the same as their other e-commerce brokers. I use a couple of broker for my personal and all of our fills seem identical. One caveat - we mostly trade for our personal stuff FANG names - decent liquidity be poor spreads. Have they filed a form 606 yet ? I'd bet their counter party is one of the big three, but I kind of recall they said VIRTU which makes perfect sense since their acquisition of Knight.
I saw an interview a year ago CNBC with them. This was before they offered margin accounts, but they said most their income came from interest they made on clients cash balances. They also stated the current account size average was 1000$. Sounded like a crazy business model to me and didn’t think it’d last. But then again I’ve never worked behind the scenes of a brokerage. I figured with ECN fees their interest cash flow would be negative But firms pay good money for retail order flow so maybe they rarely have to go to a ATS or lit exchange.