CEO Vlad Tenev On Robinhood Going Public

Published on

Following is the unofficial transcript of a CNBC interview with Robinhood Co-Founder and CEO Vlad Tenev on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) airing today, Thursday, July 29th. Following are links to video on

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q2 2021 hedge fund letters, conferences and more

Robinhood CEO Vlad Tenev on the rise of meme stocks: It’s a real thing

Robinhood CEO Vlad Tenev on the free-trading app going public

All references must be sourced to CNBC.

ANDREW ROSS SORKIN: It's great to be here with the CEO of Robinhood co-founder, eight years ago, Vlad. Eight years ago, right? More than eight years ago you co-founded this company.

VLAD TENEV: Eight years, but six years after we launched our product. So, it’s been amazing.

SORKIN: You know, more than anything, this company now represents this retail trading movement. And so, before we even talk about the company, what does this moment represent to you?

TENEV: I mean it's a very special moment for me and for my co-founder. We came here as immigrants to this country. You know, I came at JFK airport right here in New York. And then, 30 years later – less than 30 years later – we're here, and starting from nothing created this company that serves over 22 million customers.

SORKIN: So, lots of questions about this offering. And in particular, I mentioned the retail investor. What's so unique about this offering is how much presence of retail investors there is going to be in this stock now. How do you think about that and do you know how much has been allocated to the retail versus institutions?

TENEV: Oh, it's certainly going to be one of the largest retail allocations ever. And I think when you hear the mission of Robinhood to democratize finance for all, it's really about giving access to everyone what was once reserved for the 1% or the very wealthy. So, it makes a lot of sense, very consistent with how we've always operated. So, we're proud to have one of the largest retail allocations.

SORKIN: Do you know the number, though? Because I know it was going to be between somewhere between 20% and 35%. We've been hearing it's somewhere in that range. But can you pin it down for us?

TENEV: I can't, unfortunately, share the exact allocation details other than to say we're very proud to give our customers access.

SORKIN: How will it change the way you think that you will run the company and communicate with the investor base? And the reason I ask is, the retail investor base is a very different type of investor base. We've seen, for example, that the retail investor base at least over the past couple of weeks when it came to the Lucid SPAC, for example – they don't vote, it's harder to reach them. You know, AMC has now had some issues in terms of getting the vote from shareholders on certain issues.

TENEV: Yeah, I think it's certainly something we're interested in. You probably saw that we did a customer roadshow last weekend and we're going to try new things. We think that it's important not just for retail investors to participate but for there to be dialogue between retail investors and the companies that they're invested in. So, it's definitely something that you'll see us engaging with and I think the customer roadshow was one example of new things we can do.

SORKIN: You talked about democratizing investing and that you have very much done. But it's also come with this question about payment for order flow and whether the customer is not the customer. Whether the Robinhood customer is really not the one that's paying for all of this, but it is the “establishment” right? And it's the Citadels of the world, the Virtus of the world, that are actually paying 75% of the revenues that the company gets. What do you say about that and how do you explain it?

TENEV: Yeah, it doesn't resonate with me. You know, this business model that we've helped pioneer, which is now the standard business model for retail brokerage in the U.S., has allowed so many more people to participate and has led to an aggregate – lots more money being put into customers pockets rather than corporate profits. So we're proud to have passed back more value to customers and we'll continue to keep doing that. I think, eliminating commissions was really just the start.

SORKIN: What do you think the risk, though, long term is to the business model of payment for order flow, given how much of a – how big a percentage of your revenue it represents?

TENEV: Well, I do think we're going to have to keep a dialogue with the public, with the media about what payment for order flow is. I think you've probably seen me over the past couple of months engaging more openly in the topic. And the truth is, I think it could be better explained and we could continue to do that. And I think we'll continue defending it as something that has led to a much greater diverse set of people participating in the markets. And I think from a business level, you'll see Robinhood continue to diversify its business lines and its revenue over time. I mean, in particular just in the past couple of quarters, even within transaction based revenue, you've seen cryptocurrency take a larger share.

SORKIN: Well, that's what I was going to ask you, which is that a huge part of the business became Dogecoin in the quarter prior, and whether you believe that that's sustainable, what that ultimately means to the business when we have these sort of meme moments.

TENEV: I mean, my philosophy, the philosophy of Robinhood is to make it as easy as possible to participate. And on the brokerage side, the goal is really how do you take first time investors and turn them into long term investors. And you've seen that through a lot of the products that we've rolled out recently – fractional shares, drip, recurring investments – we're seeing a lot of really exciting engagement with those and we're going to continue making them better and better. So, of course there's going to be idiosyncratic moments where, you know, something becomes more culturally relevant like a particular cryptocurrency or a particular stock and, of course, we have to be available for our customers.

SORKIN: But speak to this because it's the thing that I think feels at odds. The business model does rely on, to some degree, volatility, trading, options, crypto on that side. And on the other side, I know that the company is spending an inordinate amount of time trying to both educate investors and trying to push the idea that these are long term investors. But the longer term investor is not going to be as profitable an investor.

TENEV: Yeah well, I mean we're optimizing for happy customers and we're optimizing for the long term. So, making first time investors into long term investors and giving people more selection and diversifying the product suite, based on what customers tell us, they tell us they want help spending, saving money. We want to offer all of those things. So I think over the long run if we focus on happy customers and they use our products, we'll have diversified revenue, and it'll be fundamentally very, very good for the business.

SORKIN: What's the chance that Robinhood itself becomes a meme stock? Have you thought about that?

TENEV: That's very self-referential. No, I, I haven't thought about it much.

SORKIN: But it terms of and this goes to the communication issue though, I mean, you know, you occasionally see Ryan Cohen when it comes to, you know, GameStop, he'll put out a tweet, I don't know if it's intentional or not, I think it probably isn't but he'll put, you know, a picture of an ice cream cone and all of a sudden there's folks on Reddit who think, you know, are trying to divine meaning into that and so how you think about, again, this goes to how you communicate and what you say and whether you think that actually, you know, literally a tweet can move the stock.

TENEV: Yeah I mean I think what's interesting with what we've seen in retail investing over the past year is that a lot of these companies have been hit hard by the pandemic, right? And you see it started with some of the airlines and then followed with some of the retailers, some movie chains and brick and mortar and, you know, you have the institutions that are basically writing these companies off and then retail investors coming in and, and keeping them up and supporting them.

SORKIN: So does, but does that make sense to you when you look at an AMC stock, for example, or any of these others that have moved in this way, do you say this is healthy for the markets? Do you say this is unhealthy for the markets?

TENEV: Well, I probably shouldn't comment on my own views on particular stocks.

SORKIN: But you, but I assume you must have views about whether. No, but it is, it's a phenomenon and it's a phenomenon impacted in large part by your own users and so I'm curious as to how you personally think about it.

TENEV: I think it's a real thing. I mean customers, there's customers that love these companies they want them to, to thrive. And you're seeing them also get resources that allow them to hire really good management teams, in some cases, and then build for the future. So, I think it's very interesting. I don't know if people have understood the ramifications of what high retail participation in the markets means but I think fundamentally it's a very good thing and we're excited to be a part of it.

SORKIN: My good friend Jim Cramer has got a question down from the New York Stock Exchange. Jim?

TENEV: Alright, hi Jim.

JIM CRAMER: Hi Vlad. How are you? Congratulations on a great day for you.

TENEV: Thank you. Good to see you.

CRAMER: Yes, same and I know that we had you on at the very beginning when I was in California and I've always felt that you were about democratization. I am concerned when I saw the actual documents a huge number of people are options trader. I was an options trader when I was at Goldman Sachs but you know there's a lot of possibility of losing money in options. Do you think that many of your options traders actually take delivery of common stock? Is it an onboard way or are they just really given the options and don't want to own common stock?

TENEV: Well, let me tell you, let me tell you this, Jim. So, Robinhood, our top value is safety first and so all of the work that we've been doing on the options platform is to make sure that it's clear to customers what, what they're buying. And we've made a lot of, a lot of great work around the edge cases of what options trading is because you know it is, it is complicated. It’s for more advanced customers. We've been investing a whole lot in education. But I think fundamentally there's, there's customers that are very interested in it for a variety of different use cases and it is a powerful tool that's been reserved for, for wealthier more sophisticated investors up until recently and we're proud to drive that accessibility to a broader audience.

MORGAN BRENNAN: Vlad, it's Morgan. Congratulations today.

TENEV: Thank you.

BRENNAN: I asked this question, though hindsight is 20/20, but if you could, could go back to January, would you have done things differently?

TENEV: I would say it's, you know, there's always things we could have done better and I'm the, I'm the first to say that but it's, it's been an amazing six months and it really 18 months and much, much more than that. If you had asked me six years ago, you know, would I have thought that in six years we would have over 22 million customers, over 100 billion in assets under custody as of Q2, I think the, what we've delivered for customers and the size of the business I don't think I would have been able to guess that.

CRAMER: You know, Vlad, when I look at what the 22 million are about, I want to know whether they trade every day. Sometimes we see these stocks and they're like 20, you know, 20 million shares outstanding and they trade 150 million, I mean, do you have people who are just glued to the app and will they stay glued to the app when we get the unemployment benefits lower, when more jobs come back. I’m trying to get the, you know, this kind of like who your people are because I want them in today and not flipping the stock.

TENEV: Our customers do a variety of things. I mean most people aren't trading every single day. They're looking at their watch list, they're reading the news, they're looking at their portfolios and in some cases making adjustments but we keep adding more and more content that educates customers, that keeps them informed and will continue to do that as well as adding more products that they can use through Robinhood.

DAVID FABER: Vlad, it's David Faber. Final question from us here at the NYSE. You know, Morgan had asked you about that January period I mean, what did you take away from that? You know, you're a technology company but you're a financial technology company and when those peak margin calls were coming in with big volume, you know, what did you learn about being the financial part of a technology company and all the regulations and all the things that come along with that and how are you going to apply it now?

TENEV: I think in those, in those short few weeks around end of January, early February, we certainly learned a lot. We got a whole lot of work done strengthening everything across the board not just the balance sheet but customer support. We made it a lot easier for customers that want to come back to the service. We had a lot of those at the time to actually come back and we've seen a lot of increases in activity through Q1 and Q2. It wasn't just January but April and May and I think it's been a better and better experience for our customers every time.

SORKIN: Were you surprised by that? Because, you know, a lot of times when a business has a major challenge, a customer facing business has a challenge, the customer walks and in your case, they didn't walk they actually kept, you know, even, even more came on, how did you think about that?

TENEV: Well, at the time we were just making sure that we were focused on the basics like how can we make sure our service is reliable and robust and stable through, through all of the load that we were seeing which was unprecedented at the time, how can we make sure customer support is working. And how do we, how do we get better every, every single day and I think it speaks to how much customers love the product, fundamentally. They're continuing to refer their friends, 80 plus percent of our new growth is organic and word of mouth, and we think we've just scratched the surface on that. I think there's, there's a lot more than we can do to serve people.

SORKIN: Long term, how much of the business do you think is crypto? And the reason I ask is we interviewed Elizabeth Warren, Senator Elizabeth Warren yesterday and she talked about crypto in the context of snake oil and in the context of what she said was snake oil salesmen and she said this is a sector that needs to be regulated. And so, what do you think is going to come down the pike when it comes to regulation of crypto and how it might affect you?

TENEV: I think, you know, we're going to be a participant. It's clear that our customers are interested in this asset class and I think it's becoming a more and more widely accepted asset class. You're seeing institutions taking a bigger role, it's global by nature which I think presents an interesting opportunity for Robinhood because it's a, it's a accelerant potentially for international expansion into certain markets. So, of course, we're gonna have to continue constructive dialogue and people are trying to figure out what the regulatory framework is going to be and we welcome that.

SORKIN: What do you think is the defensive moat around Robinhood?

TENEV: I think there, there's a lot. I think the brand Robinhood really stands for the, this next generation of consumers. And I don't think other incumbent brokers can, can own the message of being for the next generation and democratizing as much as we can. And I think that resonates with more and more people. I mean it's, it's a message that has kind of snowballed especially in the past 10 years. Of course, it's more than the brand. I think we've delivered the goods. When we say we're democratizing access to finance, it's not just, you know, a slogan for us but you can see that through all of our products like the stock trading business, crypto, options, our debit card and savings’ products and more recently IPO access which allows customers to participate--


TENEV: Yeah.

SORKIN: So given this IPO, what is success for you? When you talk to the bankers at Goldman Sachs yesterday and you were setting, trying to set the price, you know, it did, it did start, or it was, was at the lower end of the range at $38, do you say to yourself, I want a 10%, if we can get a 10% pop on day one, that's great, 20%, I don't want it to go down. Tell us, tell us the way you thought about it?

TENEV: The way, the way that we like to run the business, it goes back to our top value safety first, we generally like to be conservative and I know that there's a lot of misconceptions around Robinhood and how we operate, but we like to be conservative and what we wanted to make sure is that everyone is set up for long term success. I mean, ultimately, it's a, it's great to be here in Times Square but it is a moment in time and, you know, you're going to find that Jason our CFO and I aren't going to be commenting too much on day to day price fluctuations and what we want to see. We want to be a long term business that adds more and more value to customers and, you know, these short term fluctuations over the long run just wash out, we'd like to be a heavy company in the, in the words of Benjamin Graham.

SORKIN: And how much influence do you think your shareholders should have on the company? I ask because of the control nature of the way you structure the governance.

TENEV: I think we'd obviously like to hear from our shareholders. We're going to respect all of them retail and institutional and maintain really healthy dialogue. I think that you mentioned the share structure. We think the reason that that's become more important and more prevalent is because, you know, to run a short term business, it's good to avoid short term distractions that to run a long term business it's important to avoid those types of distractions and we think this positions as well to be, to be a long term focused company that takes big bets and continues to challenge the status quo.

SORKIN: And finally, when, when investors today think about your company, should they think about you as a competitor, if you will, when they're thinking about the comps, the comparables to the coin basis of the world, to certain banks, to a, to a brokerage firm, what do you think the fair comp is?

TENEV: You know, I don't know if I'm gonna, if I'm the best person to tell investors what our comps are. What I'm focused on is customers think it's a technology company that's very financial, that's obviously in financial services. I don't think, I think it's a unique company. There's not a lot of companies with our with, our growth profile and, and our product set in financial services. So it's certainly a different, a unique opportunity and a unique business that we're building.

SORKIN: Five years from now, what does, what does this company look like?

TENEV: Five years from now, we want Robinhood to be the most trusted and most culturally relevant money app worldwide. So, not just investing, we're already going beyond investing and not just in the US as well.

SORKIN: We wish you a lot of luck with it. Congratulations on a milestone day for you and we hope to see you again very, very soon.

TENEV: Thank you sir.

SORKIN: Thank you.

TENEV: It’s good to be here with you.

SORKIN: And good to see you in person, no less—

TENEV: Yeah.

SORKIN: After all of this time.