Robinhood to customers: stay a little longer

June 17, 2022

Young investors flocked to Robinhood Financial during the market rebound and day trading frenzy between 2020 and 2021, but now the tip for the commission-free trading app will be compellingem to stay with the mark.

“We have 23 million people. We’d like them to stay with us and grow, but we need to provide them with the means so they can do whatever they seek to do,” acknowledged Steve Quirk, brokerage director of Robinhood who joined in January.

The company is among many pandemic darlings, from Peloton to Coinbase, that have been taken down as the work-from-home era subsided. Robinhood lost $392 million in the first three months of the year, and its share price fell below $7, down 87% from a high of around $55 in August of last year, once closing above $70. Analysts interviewed by Bloomberg is waiting Robinhood will post a loss of $314 million for the second quarter ended June 30 and more than $1.25 billion for the full year.

And while the company has 23 million users, its number of “active” users is down and fell to 14.6 million in May, down 39% year-over-year, also reported the company.

Its total assets in custody were $73.9 billion in May, down 25% year-over-year, according to earnings reports. (Robinhood chief executive and founder Vlad Tenev told analysts on an earnings call in April that the declines were “steeper” among customers “who have lower balances.”)

According to Quirk, Robinhood has started developing products that he believes can help him retain all types of customers, even in a down market.

“We’re really spitting out new stuff at a really fast pace right now,” Quirk said, during an early June keynote with Tenev at the Piper Sandler Global Exchange & FinTech Conference in New York.

Quirk pointed to the company’s May introductions of a “revamped” cash sweep program that allows customers to earn 1% interest on uninvested cash, and its “stock loan” program, per which Robinhood lends fully-paid stock from its clients’ wallets, which, in turn, pocket a portion of the interest earned by the borrowers.

Quirk also highlighted the importance during market volatility of having the cotton of Robinhood’s younger customer demographic in its recurring investment tool, which was introduced in 2020, and is also now available for cryptocurrency investments.

He reiterated a promise that Robinhood executives have been making for several months, saying retirement accounts are next. Robinhood’s beta version of its iPhone brokerage app has code installed that would support individual retirement account rollover and contribution remittance, as well as work with legacy IRA accounts, Bloomberg reported in March.

But Robinhood needs more tools, such as more sophisticated charting, which would also appeal to more advanced traders, its chief brokerage said.

“Education has to be married to these advancements, because we have to teach people how to use them,” Quirk said. “All of these things come together to create an environment that really allows them to grow with us.”

Collectively, stock analysts predicted that Robinhood would not become profitable over the next three years, creating a negative perception reinforced when insiders, including the chief legal officer and chief operating officer, reported stock sales at the Securities and Exchange Commission.

But Robinhood founder Tenev, who appeared virtually, struck a more upbeat note. “There’s a lot more to do,” he said. “We are only at the beginning and we see a huge opportunity in front of us.”

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