Nexo is buying Vauld, marking more DeFi consolidation

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Robinhood

Power Score: 55.56

Momentum Score: 63.53 (T-6)

HQ: Menlo Park, CA

CEO: Vlad Tenev

On Power

After its founding in 2013, Robinhood turned the consumer trading world on its head by offering commission-free trading. The company's mobile app also made trading much more seamless relative to the other market offerings at the time. These two innovations allowed Robinhood to attract inventors — particularly younger investors without prior trading experience — and convert that into revenue through the controversial payment for order flow model.

Early on, Robinhood branded itself as a maverick upstart attempting to " democratize finance for all ." That narrative has drawn scrutiny in recent months, especially after the Gamestonk controversy left a bad taste in the mouth of both investors and regulators. Many early Robinhood adopters felt betrayed by the freeze on meme-stock trading, taking it as a sign that Robinhood's true allegiance was not to the traders on its app but to the market makers that paid for orders. Regulators, including current SEC Chairman Gary Gensler, have hinted at an outright ban on the lucrative payments for order flow practice. For Robinhood to continue amassing power, it needs to walk the tightrope of appeasing these two interest groups while still expanding its product offering and diversifying revenue streams. That's no easy task, but up until now, Robinhood has shown no signs of slowing down.

On Disruption

Years after it earned the "disruptor" title for commission-free trading, Robinhood has continued to shape the consumer trading landscape with new product launches. In May 2021, the company announced IPO Access to give its customers access to certain pre-IPO share sales (SoFi came out with a similar feature in March 2021). And in September 2021, Robinhood announced that it would launch crypto wallets. Christine Brown, Robinhood Crypto's chief operating officer, told Protocol in September that the crypto wallet would act as "a gateway to a broader crypto ecosystem."

In recent years, the most dramatic transformations for Robinhood haven't necessarily come from product launches but through shifts in revenue streams. Most notably, Robinhood has seen transaction-based revenues from cryptocurrencies rise from $5 million in Q2 2020 to $233 million in Q2 2021, representing 41% of total net revenues for the quarter.

Tea Leaves

Robinhood isn't shy about its ambitions to become a global company. In its Q2 2021 earning call , Vlad Tenev stated: "due to improvements in our infrastructure, our staffing and our ability to handle the scale that we've seen, we feel well-positioned to turn some of our attention to international." Tenev added that the Robinhood value proposition could resonate "even more strongly overseas than in the U.S. where people by and large have access to reasonable quality financial tools." The biggest question for Robinhood is whether international expansion would result in the company getting stretched too thin, particularly in terms of regulatory compliance. On the other hand, overseas expansion could help Robinhood hedge against some regulatory risk in the U.S.

They Said It

" Our view internally is that we don't expect payment for order flow to be banned. That's just not what we think. We expect it to be an active dialogue." — CFO Jason Warnick in an August 2021 earnings call

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