As many of their customers have learned in the last year, one minute the stock market gives you a fortune… and the very next she takes it away.
Baiju Bhatt and Vladimir "Vlad" Tenev are the co-ounders of Robinhood Markets, Inc., the stock/crypto trading platform. The duo founded Robinhood in 2015. The app found an enormous user-base after introducing zero commission stock trading, upending the likes of E*Trade which historically charged between $7 and $10 per stock transaction.
By 2018 Robinhood had 3 million users. This additional growth was largely fueled by an ingenious referral program whereby current users were given free stock shares in exchange for bringing in new users.
That same year, Baiju and Vlad became paper billionaires for the first time when the company raised money at a $5.6 billion valuation. Additional private funding rounds would see the company's valuation grow to $7.6 billion, then $8.6 billion, then $11.2 billion. In September 2020 the company completed its final private funding round, taking in $460 million at an $11.7 billion valuation.
In July 2021 Robinhood went public. It ended its first day as a public company with a $30 billion market cap. A month later the company's market cap hit $46 billion.
Vlad Tenev and Baiju each own 8% of Robinhood's outstanding shares. When the company was worth $46 billion, on paper they were each officially worth…
Unfortunately, $46 billion would prove to be (for now) the company's all-time high valuation. When the company was worth $46 billion, Robinhood's price per share was $55.
When the markets closed on Tuesday afternoon, Robinhood's share price was $9.27. As of this writing, Robinhood stock is trading at $8.15 giving the company a $7 billion market cap.
That's a 85% drop from its all-time high in August of last year. The stock is down 77% in just the last six months alone.
At a $7 billion market cap, everyone who invested in the company after its 2019 private Series E funding round is under water.
At a $7 billion market cap, Vlad and Baiju's 8% stakes are currently worth around…
And frankly, who's to say this is the bottom? In its quarterly report released at the end of April, Robinhood reported a wider-than-expected loss resulting from shrinking revenue. Revenue was $299 million for the quarter instead of $355 million that was expected. Revenue was 43% lower compared to the same quarter a year earlier. Monthly active users declined from 17.7 million from the same period a year ago to 15.9 million.
On the company's investor call, Vlad Tenev said:
"Our larger customers are still remaining active, but we are seeing more pronounced declines from those that have lower balances. With the uncertainty in the market, our customers became more cautious with their portfolios… This story was the story of two competing forces — our accelerating product development juxtaposed against a difficult macroeconomic climate."
Robinhood also recently announced a hiring freeze and a plan to trim its workforce by 9%.