Schwab Wants Robinhood’s Customers — Can the Upstart Hold On?

These days, traders are aware of a strange energy surrounding the price of Hood shares, but they are not always able to explain it. Over the past year, Robinhood, the once-controversial brokerage that made commission-free trading a generational habit, has done something that its early detractors never anticipated. It has been maturing. Silently at first, then loudly. That change has been reflected in the stock, sometimes in ways that seem almost unrelated to the news flow surrounding it.

You can tell that the company’s leadership wants the market to take them seriously now by walking through their Menlo Park offices, which are located in the former Sunset magazine building, of all places. As a full-stack financial platform with cryptocurrency rails, wealth management, credit cards, and a news section, rather than as the app that gamified investing for bored millennials during lockdown. Tenev and Bhatt’s 2014 LA Hacks demo is a far cry from this.

Although accurately pricing the transformation is a different matter, investors appear to think it is real. Many people interpreted Robinhood’s $1.5 billion share buyback announcement earlier this year as a confidence signal, a means for the business to support itself when the share price declined. Buybacks can have a variety of meanings. They can indicate that a board has run out of better ideas. In this instance, it seemed more like a calculated message: we believe we are underappreciated, and we are prepared to support that belief with money.

It’s more difficult to read the OpenAI investment. In comparison to OpenAI’s reported $122 billion valuation from March, a $75 million investment through Robinhood Ventures Fund I seems modest, and it is. However, the symbolism is important. After years of witnessing private tech wealth concentrate in the hands of venture capitalists, retail investors now have access to a public vehicle that allows them to own a portion of Stripe, Databricks, Revolut, ElevenLabs, and now OpenAI. This seems to be what Robinhood has always sought to be: a link between the general public and previously closed markets.

Then there is the competition, which is getting closer on all fronts. Charles Schwab finally introduced cryptocurrency trading while holding over $11 trillion in client assets. For years, Fidelity has been chipping away at the same area. Commission-free stock trades are now available on Coinbase and Kraken. The anxiety surrounding the disintegration of the barriers between digital assets and traditional finance is reflected in Hood’s share price nearly as much as the company’s own growth narrative.

It’s difficult to ignore how the story has changed. A few years ago, Robinhood was the company that was brought before Congress due to the GameStop scandal, the platform that regulators wanted to examine, and the brand that pundits enjoyed disparaging.

Today, Tenev is discussing prediction markets, European tokenized stocks, and a collaboration with BNY to develop a Trump Accounts app. It’s still unclear if all of these wagers will be profitable. To be honest, some of them seem more like land grabs than well-thought-out strategies.

However, the financial situation is becoming more difficult. Options trading, cryptocurrency, net interest income, and now wealth management are all making significant contributions. Every month, the platform handles over 200 million option contracts and 3 billion event contracts. That is no longer a small company posing as a large one.

As you watch this develop, it seems like Robinhood is being priced not only on its earnings but also on the kind of business it could grow into. The Hood share price is fluctuating, jumping, and sometimes collapsing for a day or two before rising, as stock prices frequently do during these shifts. It is the beat of a market that is still in the process of making a decision.