How Robinhood's IPO Roadshow is different from others
Myles Udland, Brian Sozzi, and Julie Hyman discuss Robinhood’s plan to go public on July 29th and the benefits of the company’s decision to open up its ‘roadshow’ to existing customers and interested investors.
Video Transcript
- As we await Robinhood's IPO, and we--
- Fun little animation.
- Yeah, that was fun, I liked the little feather.
And as we talk about what that's going to look like, as we talk about demand from retail traders and what's feeding crypto, et cetera. An article caught my eye this morning on Bloomberg talking about, that the road show for Robinhood was a little bit different.
And for folks who are not familiar, a road show is what a company does when it's preparing to go public. They go around, they talk to a lot of bankers to try to gin up interest. Robinhood made its road show presentation public. You know, its whole line is democratizing investing, and I think you can quibble about how pure their motives are with that. But it is an interesting thing, that they wanted to make this information available, to everyone and try to solicit everyone's interest.
- I would say they're taking a page out of Tesla's earnings calls. I mean, Tesla, for a while now, is taking questions from the average person watching or listening to the event on YouTube. But this is great. More companies should, in fact, do this, because as you know, we've grown up in a generation where these road shows are completely shut out to the average investor. You essentially wake up one day on the IPO day, and you're really learning about the company for the first time.
- Well, I think it really shows how all investor communication is changing. I mean, you look at Netflix's earnings call. For a time I think Peter Kafka was moderating that. Now they have an analyst from Fidelity moderating that. But it's not the traditional sort of, you get in the queue, and you hope they call on you, and Sozzi asked Amazon about Bitcoin, right? It's more of a moderated conversation, and not one that's necessarily, like, super tightly controlled, PR, don't ask about that.
I mean, I think, OK, maybe around the fringes it's a little bit less freewheeling, but we've all known analysts who get blackballed from earnings calls. So those questions don't come up anyway. And so, when you think about what the future of investor communication is, I think it has to be, and is going to be, more stuff like this. Because just the world-- Reg FD is 20-some-odd years old, but we're still seeing the changes that has had for how I or Sozzi thinks about their role.
- You are right on. The problem is, I ask a lot of executives, and I've been doing more so recently, how are you going to evolve how you do business? Because more retail investors own your stock. They acknowledge it. They acknowledge it just a little bit, but they're not making any changes to their earnings calls. And that is, I think, a big missed opportunity for them, and also a big problem.
- And one other point I would make is, we're talking about giving better access to information. When it comes to Robinhood and the like, we're not necessarily saying better access to the actual shares, right? I bet that if you are an individual investor, you still have to fight tooth and nail, and probably can't get any access to an allotment of shares for the initial public offering.
So there's a lot-- there's a big difference between having the information and actually being able to buy it.
- With them reserving, I think it's 35% of shares for members of the platform, you can get one. Like, you might not get your whole fill, but you can get-- I suspect, I'll be actually fascinated to see how they're--
- Right, if they are it for members of the platform.
- I suspect that Robinhood will try to give as many people an allocation as they can, but the aggregate allocation will remain that 35% target. So there's no, like, there probably won't be a retail whale out there who ends up with 1,500 shares of Robinhood if they requested that many. But everyone gets one, so that-- because you can do the math two different ways.
- While we're giving them a pat on the back for how they did the road show, that webcast, they were asked the question on PFOF, or payment for order flow. That's 81% of their revenues in the first quarter. They acknowledge that if PFOF gets banned, it will impact the business but they have no alternative. And if they do, they haven't shared it with the investors that might be buying their stock.
- I don't see it getting banned. Right? If anything, the whole conversation around Robinhood clarified what payment for order flow is, what it's not, and-- I don't know.
- Well, the market will decide, right?
- Populist movement? Get out of here with that.
- We talked to we talked to the head of a competing platform public, which instead of having payment for order flow, they solicit tips from their users. Remember that? And they are not revealing yet how many tips they're collecting, but so the market is kind of figuring it out here, what's going to be the winning model.
- And one day, maybe they'll decide they want to get paid for order flow.
- Maybe they will.
- And you go home and you say, that money is still green. And everyone-- I mean, I'm sorry. I just can't-- I can't see the scandal in a retail investor getting scalped for a half penny on their shares. It's free. It's an amazing subsidy. It's an amazing service. Incredible. I could go buy Apple right now pretty much at the market price with no commission on a number of platforms because of what's happened. And so Citadel takes a quarter of a penny.
- We'll talk about your allotment, when it comes out with the--
- Have at it.
