Robinhood Markets:
Through a smartphone app launched in March 2015, Robinhood Markets, Inc., an American financial service firm with its main office in Menlo Park, California, enables commission-free trading of stocks, exchange-traded funds, and cryptocurrencies. The U.S. Securities and Exchange Commission has registered Robinhood as a broker-dealer, and it is a part of the Securities Investor Protection Corporation. Interest on cash balances of clients, selling order information to high-frequency traders (a practice for which the SEC started an inquiry into the firm in September 2020), and margin lending are the three primary sources of the company's income. Robinhood has 15.9 million monthly active users as of March 2022, and 22.8 million funded accounts. Robinhood released a cryptocurrency wallet to more than 2 million consumers in April 2022.
History:
Vladimir Tenev and Baiju Bhatt, who had previously developed high-frequency trading systems for financial institutions in New York City, created Robinhood in April 2013. The phrase "give everyone access to the financial markets, not just the rich" is taken from the company's mission statement. Tenev said that while brokerages only paid "fractions of a cent" to execute trades, they routinely imposed fees of $5 to $10 for each transaction and had account minimums ranging from $500 to $5,000.
The company debuted its app in front of the general public for the first time at LA Hacks, released it on the AppStore for the first time in December 2014, and then formally launched the app in March 2015.
The average consumer age was 26 as of January 2015, and 80% of the company's patrons belonged to the "Millennial" generation. 90% of users who have made a transaction on the app do so every week, with 50% of users using it daily. Robinhood has 15.9 million monthly active users and 22.8 million funded accounts as of 2022.
In April 2017, Yuri Milner of DST Global, Greenoaks Capital, and Thrive Capital led a $110 million fundraising round for Robinhood at a $1.3 billion valuation.
On September 6, 2018, in San Francisco, California, co-founder of Robinhood Baiju Bhatt and moderator Josh Constine take the stage to talk during Day 2 of TechCrunch Disrupt SF 2018.
A $363 million Series D fundraising round headed by DST Global was completed by Robinhood on May 10. Robinhood has secured $539 million in venture capital investment as of May 2018, and its most recent value increased from $1.3 billion to $5.6 billion.
The business announced in February 2018 that it would relocate from Palo Alto to the old Sunset magazine offices in Menlo Park.
According to reports from Bloomberg and other media sites, Robinhood is attempting to raise an additional $200 million, which would put the company's worth in the $7 billion to $10 billion area. Robinhood announced its entry into the UK market in November 2019.
Trading on Robinhood grew when the 2020 stock market meltdown occurred. Robinhood traders were largely credited for the ensuing market increase, but research found that they had little daily influence on key shares.
Robinhood revealed in May 2020 that it had secured $280 million in venture capital at an $8.3 billion pre-money valuation under the leadership of Sequoia Capital. Three months later, on August 17, the business announced a $200 million Series G investment round from a new investor, D1 Capital Partners.
The FINRA penalized Robinhood $57 million in late June 2021 and mandated that it pay $13 million in compensation to customers who were negatively impacted by disruptions and deceptive statements in March 2020. This was the greatest FINRA fine in the organization's history.
On July 29, 2021, the business was listed on the Nasdaq with the ticker symbol "HOOD." The price started at $38, fell to a low of $33.35 soon after, then began to rise, hitting an all-time high of $85. After encountering rising regulatory uncertainty, dropping Q3 results, and reporting that a security issue had impacted 7 million users, it then plunged dramatically again.] On December 1, 2021, the stock price had fallen by 70% during the previous four months and had hit all-time lows below $25. [Reference required] Stock short sellers benefited from this collapse in price.
Robinhood's 2022 layoffs, which received extensive media coverage, underlined the company's continued to collapse. The corporation reduced its employment by 9% in April during the first round of significant layoffs. More noteworthy was Tenev's revelation that Robinhood would be laying off 23% of its personnel, mostly in the areas of operations, marketing, and program management, which was made public with the company's 2022 Q2 results on August 2. The value of Robinhood's shares decreased by 48% from January to August 2022.
In its first crypto enforcement action, the New York State Department of Financial Services penalized Robinhood's cryptocurrency subsidiary $30 million in August 2022 for allegedly breaking cybersecurity and anti-money-laundering laws.
Sam Bankman-Fried, the founder and CEO of FTX, announced a 7.6% ownership stake in Robinhood in May 2022 via his trading company, Alameda Research. In November 2022, Reuters quoted unnamed sources as saying that Alameda utilized shares in Robinhood as security for a transfer of at least $4 billion from FTX.
Products and services
Stock and ETF trading:
Commission-free trades of stocks and exchange-traded funds were Robinhood's original offering. Robinhood introduced instant deposits in February 2016, crediting users immediately for deposits up to $1,000. Previously, funds would take three days via ACH transfer to show up. They introduced Robinhood Gold in September 2016, a premium subscription service that offers instant deposits up to $50,000, margin trading, and additional market analytics. The business has completed deals worth more than $30 billion as of February 2017. [6] The firm started giving out free stocks in August 2017 in return for introducing new customers. Options trading was launched in December 2017. Bonds, mutual funds, and retirement accounts are among the services that are not provided.
Robinhood usually does not offer trading in over-the-counter securities, such as those traded on OTC Markets, and instead only supports trading in stocks and ETFs that are listed on the Nasdaq and New York Stock Exchange. Support for American depositary receipts was added to Robinhood in August 2018, along with 250 highly sought-after foreign equities. In August 2018, Robinhood forbade consumers from acquiring certain risky penny stocks, including purchases of Helios and Matheson Analytics, the company that owns MoviePass.
Several significant brokerages, including E-Trade, TD Ameritrade, and Charles Schwab, swiftly announced in October 2019 that they were doing away with trading fees. One reason offered was rivalry with Robinhood. However, Charles R. Schwab said that as his brokerage had traditionally been a discount-breaking company, it was within the brokerage's plans to ultimately remove trading costs. In December 2019, support for fractional share purchases and automated dividend reinvestment was made available.] In May 2020, automatic recurring investments were initiated. In May 2021, initial public offering (IPO) shares were available.
Robinhood stated in March 2022 that it will increase customer trading hours by four more hours. To ultimately provide 24/7 stock trading, Robinhood announced that it would be accessible from 7:00 AM to 8:00 PM ET. Robinhood announced the introduction of a stock lending service in May 2022. Through this program, consumers may authorize Robinhood to lend out any fully paid stocks in their accounts.
Cryptocurrency trading:
Robinhood's first product was commission-free trading of equities and exchange-traded funds. In February 2016, Robinhood made quick deposits available, rewarding consumers right away for deposits up to $1,000. Previously, an ACH transfer would need three days for the cash to appear. In September 2016, they released Robinhood Gold, a premium membership service with quick deposits up to $50,000, leverage trading, and more market data. As of February 2017, the company has closed more than $30 billion in agreements. [6] In August 2017, the company began providing free stocks in exchange for referring new clients. Trading in options began in December 2017. Retirement accounts, mutual funds, and bonds are a few of the services that are not offered.
Typically, Robinhood only offers trading in stocks and ETFs that are listed on the Nasdaq and New York Stock Exchange and does not provide trading in over-the-counter securities, such as those traded on OTC Markets. In August 2018, 250 highly sought-after foreign equities were added to Robinhood along with support for American depositary receipts. Consumers were prohibited by Robinhood in August 2018 from purchasing several dangerous penny stocks, including Helios and Matheson Analytics, the firm that owns MoviePass.
In October 2019, several large brokerages, including Charles Schwab, TD Ameritrade, and E-Trade, promptly announced that they were eliminating trading fees. Rivalry with Robinhood was cited as one motivation. Charles R. Schwab said that his brokerage has historically been a discount-breaking business and that eventually eliminating trading charges was part of the firm's ambitions. Support for automatic dividend reinvestment and fractional share purchases became available in December 2019.] Automatic recurring contributions started in May 2020. Initial public offering (IPO) shares were available in May 2021.
In March 2022, Robinhood announced that it will extend client trading hours by an additional four hours. Robinhood stated that it will be available from 7:00 AM to 8:00 PM ET in an endeavor to eventually provide 24/7 stock trading. In May 2022, Robinhood announced the launch of a stock loan business. Customers may authorize Robinhood to lend out any fully paid stocks in their account using this scheme.
Banking:
A spokeswoman for Robinhood said that the firm was in "constructive" discussions with the U.S. OCC at the time it was revealed that Robinhood was in the process of applying for a U.S. banking license. The availability of checking and savings accounts with debit cards provided by the Ohio-based Sutton Bank was announced by Robinhood in December 2018. The highest interest rate on a savings account from a regulated bank at the time of the announcement was 2.36%. Robinhood said the accounts would offer a 3% annual interest rate. The SIPC rejected Robinhood's original assertion that the accounts would be SIPC-insured. The next day, "Cash Management" was added to the product names. The app's waitlist and sign-up website were taken down in January 2019.
A Cash Management function with FDIC protection from many partner banks and an annual interest rate of 2.05% was announced in October 2019, yet it was dropped before introduction to 1.8% due to a federal interest rate reduction. The function became life in December 2019. The Robinhood Cash Card, a debit card that enables users to automatically invest in assets like stocks and cryptocurrency while spending money, was introduced by Robinhood in March 2022. The business discontinued its Cash Management debit card when it introduced the Cash Card.
