The Big Story

Under the $HOOD

After years of letting everyone play the market, Robinhood is finally ready to join it. On Thursday, the company flipped its long-awaited S-1 paperwork, giving the first glance under the "$HOOD," as they say, into how its business operates.

This filing has everything:a dogecoin dilemma, a search warrant for its CEO's phone and millions of users trading enough stonks to make it profitable. So, let's dig in.

To no one's shock, Robinhood's business is giant. Now we just know how large. As of March, the company had 18 million accounts and over $80 billion under management.

• Around 17.7 million people use it monthly, and in Q1 alone, 9.5 million customers used it to trade cryptocurrencies. I'll also admit to a bit of newsletter envy: Robinhood Snacks, its newsletter and podcast, has nearly 32 million subscribers.
• The rise in stock trading tripled the company's revenue to $958.8 million last year and turned the company profitable, barely. It recorded a net income of $7.4 million in 2020, compared to a net loss of $106.6 million in 2019.
• That's in part due to its controversial payment for order flow business. Robinhood made 81% of its revenue in Q1 2021 from market-maker payments and "other transaction rebates" related to cryptocurrency. This is also a concentrated risk for the business: 59% of its revenue that quarter came from just four market makers.

Robinhood allocated way more shares than usual for individual investors, in keeping with its vision of making everyone a stock trader. It recently announced its IPO access platform and plans to set aside as much as 35% of its IPO shares for its users to buy. Or as The Wall Street Journal put it, Robinhood wants people to buy Robinhood on Robinhood.

What could go wrong? Actually, a lot of things have gone wrong before (that's how the company ended up with a record-breaking $70 million fine the day before its S-1 dropped).

• Robinhood spent nearly $50 million on cloud infrastructure to prevent outages like the events of last March and April, but warned that restrictions like the ones it placed on GameStop trading in early 2021 could still happen in the future.
• The chaos around those outages, and the ensuing media coverage, was stated repeatedly as a big risk to the company. As Protocol has pointed out, "these risk factors are often interrelated, as evidenced by the GameStop debacle: What started as a public perception issue soon became an opportunity for competitors, before ultimately transforming into a regulatory threat."
• It's also facing lots of legal troubles, including more than 50 class-action lawsuits. As part of its disclosures, Robinhood also said that the U.S. Attorney's Office for the Northern District of California executed a search warrant on CEO Vlad Tenev's phone.

Then there's the most absurd risk factor I've seen in a while: dogecoin. A cryptocurrency based on a meme of a dog now makes up 34% of Robinhood's crypto revenue and is an actual business risk.

• "If demand for transactions in dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected," Robinhood writes in the S-1.

The big question now is whether the same meme engine that helped power Robinhood's success will help or hurt its IPO. The meme stocks already crippled its platform before, and that's when its users were targeting other stocks. Soon, Robinhood's own stock could become a stonk — but only if it's a bet that both Wall Street and r/WallStreetBets take.

— Biz Carson (email | twitter)

A MESSAGE FROM TRELLO

Trello Enterprise is where large teams complete their best work: secure, easy to manage at scale, with powerful integrations and automations at your fingertips. Learn how Trello has sustained hybrid work over the past decade with tips and best practices from its founding leadership team.

Learn more

People Are Talking

On Protocol | Fintech: The future of open banking is in just a few hands, which makes Treasury Prime's Chris Dean nervous:

• "I really really want this to happen. I have no faith that this is gonna happen. The largest banks — the top five to 10 banks — they have to be the ones who say it's OK because that's where the majority of accounts are. Until they give the thumbs-up that they really want to do this, I do not have a lot of faith here."

Amazon added two new leadership principles to its list, including this big-picture thought:

• "We started in a garage, but we're not there anymore. We are big, we impact the world, and we are far from perfect. We must be humble and thoughtful about even the secondary effects of our actions. Our local communities, planet, and future generations need us to be better every day."

Matthew Ball helped launch a new Metaverse ETF, and said it's coming faster than you think:

• "Most of our purchases, much of our time is not about buying things for the real world through the internet, but buying the unreal or non-real things within these virtual spaces … it has become the newest obsession of all the biggest tech companies in the world."

Making Moves

Wally Funk is going to space. Fifty years after she was told she couldn't go to space because she is a woman, she'll have a seat next to Jeff Bezos on the New Shepard rocket on July 20.

Facebook, Google, TikTok and Twitter are working together to help women be safer online. They've committed to offering more settings and controls, simplifying abuse-reporting tools and proactively combating abuse.

Jason Miller, Donald Trump's former aide, launched a new social media service called Gettr, which appears to borrow both content and ideas directly (and liberally) from Twitter. The question is, will Trump himself join? So far, it doesn't sound like it.

In Other News

• On Protocol: Facebook is ramping up its cloud gaming efforts. Its gaming chief Jason Rubin said Facebook plans to cover 100% of U.S. users by this fall.
• Apple is testing hybrid work for Apple Store employees. Its "Retail Flex" pilot program will let some employees do sales, tech support and customer service from home, Bloomberg reported, even as all its stores remain open.
• The FTC passed two new antitrust measures. One gives it broader abilities to look into anticompetitive behavior, and the other simplifies the rule-making process.
• Pinterest banned weight-loss ads. The company said it's part of its attempt to foster a more positive, productive community, "where everyone belongs — regardless of body shape or size."
• On Protocol: Big Tech might soon get Big Taxed. A new OECD agreement proposes a global 15% minimum tax rate for large multinational companies, which it estimates will bring in about $150 billion in new revenue for governments.
• Amazon is discussing forming an alliancewith Slack and Dropbox to take on Microsoft 365, Insider reported. It reportedly proposed a software bundle with single sign-on and unified billing.
• A brand new Tesla caught on fire while the owner was driving. The owner initially struggled to get out of the burning Model S Plaid because the electronic doors stopped working.
• Fancy Bear is at it again. The Russian hacking group has been trying to brute-force its way into computer systems all over the world, U.S. and U.K. intelligence groups found. It's not a particularly clever approach, but it's apparently working.

One More Thing

Your holiday weekend #content

Most of us in the U.S. are about to get a few days off. So, in case you're looking for something that keeps your brain going, or a semi-convincing reason to steal away from your family for a few hours, here are a few things to add to your weekend to-do list:

• Read "Project Hail Mary" by Andy Weir. If you liked "The Martian," you'll love this interplanetary caper that involves science-ing the you-know-what out of pretty much everything in the galaxy. And some others.
• Watch "The Tomorrow War." It's a sci-fi epic that sounds like "Terminator," only with more aliens and made by Chris McKay, the "Lego Movie" director. It's on Prime Video, and we'll definitely be watching.
• Go beta crazy! Windows 11 and macOS Monterey betas are both available for download, as is iOS 15. Obviously, all the caveats apply, but what fun is a long weekend without some wacky troubleshooting?
• Read "Test Gods: Virgin Galactic and the Making of a Modern Astronaut" by Nicholas Schmidle. The CEO space race is kicking off for real this month, and Richard Branson looks like he's going to beat Jeff Bezos to it. This is a great read on how we got here.
• Watch "Zola." Still, as far as we know, it's the only Twitter thread to ever turn into a movie. That counts as tech, right? Even though the movie is about strippers in Florida? Yeah, we'll count it.
• Listen to Joe Lonsdale's American Optimist. Lonsdale is not short on big ideas or strong opinions, and the first few episodes of his show/podcast/whatever you want to call it feature Kimbal Musk, Ashton Kutcher and more people with equally big ideas and strong opinions. It's fun.
• Read … all the software architecture books.Here's yet another great GitHub repo filled with books you should read (and some you should avoid) if you want to know more about how software works. A bit dense for a holiday weekend, but no shame in that!

A MESSAGE FROM TRELLO

Company culture has changed overnight. With a mass shift to home offices, many businesses are asking: What does our future look like when people can work from anywhere? In this first-ever roundtable with Trello's leadership team, learn how Trello has scaled a successful hybrid work model over the past decade.

Learn more