New • Report

How Memestocks Could Affect Robinhood’s IPO

Friday, July 16, 2021 • 8:00 AM EST

Key Takeaways:

1. Deposits to Robinhood accounts soared earlier this year, as investors poured cash into crypto and memestocks
2. Robinhood users are taking a 21st century approach to diversification - investing in cryptocurrencies, fractional shares and ETFs
3. 2020 proved to be a huge year for Robinhood - 28.4% of its users signed up in 2020, making it the trading app’s strongest year for user acquisition
4. Only 36% of Robinhood users say they would purchase shares in the company when it goes public.

Robinhood’s expected market debut has stock market investors and the trading platform’s users already buzzing with anticipation. Ahead of the anticipated IPO, Cardify analyzed first-party data on investor deposits, withdrawals, market share, user acquisition, and average new user spend for Robinhood and other major stock trading platforms. Cardify also conducted two surveys of active Robinhood users to better understand when they joined the platform, how they use it, and their plans to buy (or not buy) Robinhood stock at IPO.

Since January 2020, Robinhood has led the pack in terms of indexed deposits, seeing relative spikes that are much larger than Fidelity, Schwab, Vanguard, and TD Ameritrade.  This indicates that the dollar volume being spent via Robinhood’s platform has been higher than many competitors’.

Robinhood also leads the market in terms of indexed withdrawals (on a $ basis), particularly as memestocks took off in early 2021 and Robinhood endured a variety of scandals surrounding Gamestop and AMC stock trading.

Robinhood dominates in retail investing market share, maintaining a significant market share lead over the next biggest competitors (Fidelity and Vanguard). Based on a sample of about 240,000 users of various investing platforms, it signals that for a substantial data set, the investing platform is seeing not just meaningful engagement - but meaningful deposits. For our US panel, Robinhood dominates the retail investing market share.

Robinhood’s user acquisition (defined as when a user makes their first deposit within an institution) heavily fluctuates and is directly correlated to drama in the market: the pandemic in March 2020 and then memestocks in early 2021. However, this seems to apply across all platforms.

To better understand usage patterns, Cardify conducted two surveys of verified Robinhood users who have deposited money on the platform within the last 18 months. The majority (63%) of Robinhood’s users signed up for the platform since 2019, with 2020 alone accounting for 28.4% of Robinhood’s surveyed user acquisition since 2013.

When we asked the top uses for Robinhood’s platform, users reported the following order: buying stocks & ETFs, crypto trading, buying fractional shares, options trading, and finally Robinhood cash management.

When asking Robinhood users if Reddit has affected their trading strategy, ~57% of traders reported that it has had no effect. However, around ~36% of individuals have stated Reddit has impacted their investment strategy.

When it comes to IPO, the results are mixed, 37.4% of Robinhood users say they would purchase shares in the company on IPO.

Despite the Gamestop drama and differing feelings about the IPO, 27% of traders report Robinhood as their preferred platform, the leader of the pack by far (Fidelity is second at 21% and Vanguard is third at 13%). That said, only 66% of people said they were highly likely to continue using Robinhood and only 17% could be considered Promoters under NPS, posing another risk for a platform dependent on repeat user transactions.


Methodology


All data presented in this report is based on first-party, real time transaction and survey data supplied by our parent company, Drop. The data within these insights and reports are always normalized against any material skews in our panel demographics. For this report, we analyzed the anonymized spend data of about 240,000 investment panelists over the past 18 months and surveyed over 1600 panel members from Jun. 24 - Jul. 15, 2021.