These two pros are not interested in Robinhood IPO – here’s why

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Jul 29, 2021
  • Josh Brown says Robinhood is online gambling and not a good investment.
  • Stephen Weiss shares his disappointing experience with using the trading app.
  • Robinhood’s debut on Nasdaq on Thursday saw shares sliding nearly 10%.

Robinhood’s debut on the Nasdaq Stock Exchange on Thursday saw shares sliding nearly 10% to trade around $35 a share after the fintech firm had priced its IPO at $38 a share last night. The price action trimmed market capitalization by roughly $3 billion for Robinhood that is now valued at $29 billion.

Josh Brown’s comments on CNBC’s “Halftime Report”

Robinhood has been in the headlines ever since the meme stock phenomenon caught fire this year. With popularity came criticism that continues to date, including from Ritholtz Wealth Management CEO Josh Brown, who said on Thursday it was online gambling and not a good investment.

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“A lot of this started out as regulatory arbitrage. The neat trick was getting big enough, fast enough before anybody knew what was happening. And they just paid a big fine related to some of that regulatory arbitrage. Maybe they’ll clean up their act. But in the end, this is not an investing business, this is online gambling,” Brown added on CNBC’s “Halftime Report”.

Stephen Weiss shares his disappointing experience with using Robinhood’s trading app

During the same interview, Stephen Weiss of Short Hills Capital Partners said Robinhood was not a disruptor and that he didn’t see anything magical about Robinhood. Weiss also shared his experience using the company’s commission-free trading app to buy Bitcoin.

“I wired money on Wednesday morning. It didn’t get there allegedly until the next week. My order from the previous week was executed a week later. It’s not a better app than any other financial app out there. It just caters to a different clientele,” Weiss added.

Further criticism on Robinhood is related to its payment for order flow business model, which many are speculating that SEC Chair Gary Gensler might decide against at some point. The fintech firm currently generates about 80% of its revenue from payment for order flow but intends to diversify its sources of revenue in the future, as per the CEO Vlad Tenev.

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