Meme stocks: ‘The power of the retail investor has never been stronger,’ Webull CEO says

Webull CEO Anthony Denier joins Yahoo Finance Live to discuss meme stocks like GameStop and the rise of the retail investor.

Video Transcript

- We are coming up on the one-year anniversary of the start of the 2021 meme stock frenzy, which kicked off with short sellers being hammered by GameStop apes. So what's next for the retail investor community? Joining us now is Webull CEO Anthony Denier. And Anthony, feels like yesterday we just talked to you on January 29, 2021, when all of this was hitting the fan. What is the straight-- what is just the state of the retail stock community right now?

ANTHONY DENIER: Well, I think the retail investor right now is trying to come to grips with a new reality, right? So for the last decade, we've been in a quantitative easing state where the Federal Reserve has been a backstop to the market. And now that's changed, right? Now 2022 is going to be the first time in a very long time that we're going to see the quantitative tightening, and we're going to see interest rates rising, right? So I think the retail investor is trying to get their head wrapped around what the new leaders are going to be. And it's certainly seeing a risk-off event through January so far.

JULIE HYMAN: Well, and the other thing, Anthony-- it's Julie here-- is that some of these folks might have already seen losses, right? There was some recent Morgan Stanley analysis where they looked at the sort of profit-loss for retail investors and found that that line is declining at best. And so perhaps, these folks already have less money to put to work? Are you-- are you seeing any evidence of that on the platform?

ANTHONY DENIER: Yeah, we are seeing customer AUM actually decrease over the last-- over through Q4 and through the beginning of January. You know, a lot of that has to do with taking losses and positions and then selling some of those losers. We also have to deal with taxable events, right? We're getting into now tax season, people taking those tax losses to offset some of their earnings through '20 to 2021. So a lot of that combined, it's certainly the case. So we're seeing retail investors being resilient and sticking with some of their core names but certainly taking some-- some risk off the table on names that have taken big, big hits

INES FERRE: Anthony, Ines here. I'm curious your thoughts on the meme stock phenomenon, which is roughly a year old now. And you've seen the kind of decline in these speculative assets. Do you think that another meme phenomenon would happen again? And what are your thoughts on the retail investor and meme stocks?

ANTHONY DENIER: I will never discount another meme stock event, right? Anything can happen now with communication being in the state that it's in, so readily available and everything being so instantaneous.

I think looking back a year and thinking, like, what have we learned, what have we gained from-- you know, we can call it GameStop, we can call it meme-- is a couple easy-- easy lessons here. Public-- the power of the public or the power of the retail investor has never been stronger, right? And we've learned that through that-- that short squeeze event. We've also learned that our market system and our market structures are inefficient.

So hopefully, looking forward, especially for the benefit of the retail investor we can see the policymakers take real action to make the market more efficient for investors and faster to settle for investors. And we can also see that retail investor really utilizing that power and doing it in a way to educate themselves about the market, educate themselves about trends, and continue to learn and become smarter investors overall.

- Well, let's stay on that, Anthony, because right now I'm looking at GameStop shares down about 6% fell below $100 with this move here. Keep in mind, at this time last year GameStop shares were around $500 a share. And I can't tell you the putrid tweets I get every time I-- I mention GameStop on Twitter. And that is something negative. Fact is a lot of people still own this stock. If you have written the stock down from a 500 to 96, what's your play?

ANTHONY DENIER: I mean, when you talk about the angry-- the angry tweets you get-- and I can totally-- I could totally agree with you there. I'm not-- I'm not alone. There's a very vocal minority, I think, of investors that are involved in this GameStop phenomenon. If you see the prices now, that tells me that diamond hands or apes, I think it's a lot of talk. I think people-- we're seeing-- we're seeing our traders and our investors take money off the table in GameStop, right?

And you know, when it comes down to your own personal pocketbook that's what's important, right? Managing your own P&L. You know, everyone-- everyone's a patriot on July 4. But you know, it really comes down to, you know, you managing your portfolio correctly. And I personally-- I'm not involved in GameStop. I don't recommend stocks. But if I saw these, you know, these moves, I would be taking money off the table.

INES FERRE: And just moving off of that point also, Anthony, we've seen such engagement from the retail community during the pandemic. And investing apps have seen an influx of people trading on those apps. Do you think that this will continue post-pandemic and especially if we see a significant haircut in the markets?

ANTHONY DENIER: Well, you know, bullish markets always makes for more traders. That's just the business that we're in. When markets start to slow, when markets, you know, start going down on a daily basis-- we see corrections like we've seen-- trading definitely slows down, right? It is a cyclical and seasonal business in that sense.

However, I do-- I do want to point out that this new trend, right? We call it new, and now it's several years old. But this new trend of retail investors managing their own portfolios, I do not think that that goes away. I think it's only going to increase.

The traditional kind of mindset of paying some other person a ridiculously high fee to manage your own portfolio I think is kind of going away. I think the younger generation is very DIY in terms of their own investing and their own finances. I think they're extremely intelligent and savvy and know how to utilize the tools that are available that weren't available simply four or five years ago, right?

So you know, the educational content that's out there, the influences that are out there that actually, I would say, most of them actually really know what they're talking about, like these are leaders that are helping this younger generation become a better investor and self-sufficient, self-directed investor.

That trend, what we're seeing here at Webull is not going away. We see interaction on our community at all-time highs. We see people engaging with one another, talking about investing even in down markets, right? So it takes the market to go lower to go higher. So you know, we always see these types of trends. It's all about not seeing, you know, missing the forest for the trees and understanding this is a long-term opportunity for a lot of young people.

JULIE HYMAN: And Anthony, finally just quickly, you talk about that engagement on your platform. We were showing numbers a few moments ago about that huge surge in people opening accounts on Webull last January. How many of those folks are still around? What has been the sustainability of the trend, as you have seen it?

ANTHONY DENIER: Our retention rate is well over 90%, right? And that's-- that's very unique to Webull in terms of the way that we create our user experience is exactly that. We're not a utility for our customers. We are an experience. We're a place for them to connect. We're a place for them to learn. We're the second-largest app-based broker-dealer in the US.

And we're the only large broker dealer in the US that has a built-in community, right? Where traders and investors can converse with one another and have peer-to-peer interactions. So we're seeing really great retention even after those spikes of users. And we continue to improve our product, which keeps our customers engaged.

- Well, always good to get some time with you. Webull CEO Anthony Denier. Appreciate you taking the time. Ines Ferre, we'll check back with you later.