Robinhood’s IPO Roadshow Answered Questions I Didn’t Ask

“What is your favorite planet?” is a real question that Robinhood execs actually chose to answer during the Q&A section of the private investor roadshow.

“Definitely Pluto,” says long-haired CEO Vlad Tenev. He’s having a great time. He goes on to explain that there will be a great view of Venus after sunset tonight.

Many of the questions the management chose were bland; asked if Robinhood would like to add a customer support line, Tenev gleefully explains that there is already one. Another question is wasted on whether the stock will pay dividends – anyone who read the prospectus know the answer is no.

I’m watching this roadshow – my first, and I suspect the first of many to watch – because Robinhood plans to sell as much as a third of its IPO to its users. The roadshow is part of a plan to put retail investors on “equal footing” (according to the prospectus) with institutional investors. At the top of the presentation I was told that this is basically the same material that institutional investors get.

And why am I spending my Saturday on this? Well, it will be the first meme IPO. And if this works, other companies may choose to increase the proportion of their stock they allocate to retail investors, said Robert Le, senior analyst at Pitchbook. Most IPOs only allocate 1 to 3 percent of their shares to retail investors, he says. If Robinhood ends its first day of trading higher than where it started, other companies may follow in its footsteps. However, if stock trends fall, institutional investors may want to avoid IPOs with much of the retail trade, Le said in an email.

Robinhood has not previously offered its investors access to an IPO, which worries David Erickson, who was co-head of global equity markets at Barclays until his retirement in 2013. (He is now a teacher at Wharton Business School at the University of Pennsylvania.) “They don’t have the best internal controls,” Erickson says in an interview, pointing to Robinhood’s history of breakdowns. “For a company that is supposed to keep your money safe, they don’t necessarily do it well.”

During the roadshow, Tenev, his co-founder Baiju Bhatt – who also rocks some shiny locks – and CFO Jason Warnick appear in an expensive and awkward facsimile of a living room. They sit on a white bench, with random wooden slats behind it; plants hang from the slats. In front of them are small wooden tables. Bhatt and Warnick clearly read from teleprompters. Many speakers on the call wore a pin of Robinhood’s feather logo – but not Tenev.

In the end, there were real, substantive questions. While Robinhood does not provide a timeline, it is apparently working on creating wallets for its cryptocurrency users so that they can transfer their crypto from elsewhere. A beta will eventually come, but because it’s impossible to recover cryptocurrency if it’s mishandled, Robinhood is moving slowly, Tenev says.

And as for payment for the order flow, which will account for 81 percent of Q1 revenue in 2021, Robinhood plans to work with regulators to address the concerns. This sounds suspiciously like Robinhood is planning to lobby — and it could be the former SEC employees hired at Robinhood bij. As for the angry meme stock customers that could leave? Tenev dodges the question. outage? Robinhood says it is investing resources to create layoffs so they don’t keep happening. (We will see!)

The most interesting comments are saved for the end. First, Robinhood is considering IRAs and Roth IRAs, two types of retirement accounts, as products it can offer. (Whether people want to save for retirement on their fun gambling app is an open question, but sure!) Second, Robinhood thinks retail investors are in the market to stay; it is working on diversification by building out Robinhood Gold, the paid product, as well as cash management, more cryptocurrency offerings, and fully paid securities lending.

There is one glaring omission in the roadshow. Despite its lovey-dovey mission statement about democratizing finance, the founders’ class B shares get 10 votes per share, while IPO investors’ class A shares get just one vote per share. Erickson, the Wharton teacher, doesn’t like that either. “This one bothers me like WeWork bothered me,” he says.