Jul 7, 2021 • 55M

#100 - Who Sells More DOGE: Robinhood vs. Coinbase, Series A Canadian FinTech Standouts and RM Angel Investors

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This podcast covers growth investing in Canada and is dedicated to identifying the latest trends in technology and discussing ways Millennials can leverage them to better invest their time and money.
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In this week's episode of Reformed Millennials, Broc and Joel shake things up a bit. New music, new podcast cover, slightly new format. Tune in to listen to us go through how Robinhood makes money, how their offering compares to Coinbase and what early stage Canadian Fintech companies are worth keeping an eye on.

Listen on AppleSpotify, or Google Podcasts.

If you aren’t in the Reformed Millennials Facebook Group join us for daily updates, discussions, and deep dives into the investable trends Millennials should be paying attention to.

👉 For specific investment questions or advice contact Joel @ Gold Investment Management.

📈📊Market Update💵📉

For the last 100 years, there has been a singular narrative you could point to that’s driving markets up and down... But now there are pockets of bubbles that are controlled by dozens of independent narratives.

The story of the last week has largely revolved around commodities like oil.

But today, we saw one of the biggest companies break out. AMZN.

$AMZN was testing a crucial resistance level around $3,500. As Tom points out, $AMZN blasted through resistance in today’s session and closed at an all-time high for the first time since last September. The stock has been stuck in a well-defined range for the past 10-months. Amazon is the largest stock in the Consumer Discretionary sector and the 3rd largest stock in both the S&P 500 and the Nasdaq 100.

After nearly a year of sideways price action, one of the largest stocks in the market looks poised for another leg higher.

If I’m an investor i’m looking in 4 places for value:

  1. US Cannabis


  3. Japan + Britain

  4. Canadian Oil and Gas

  5. Matterport ;) kinda/sorta

💸Reformed Millennials - Post of The Week

Robinhood Is Going Public!

Below is a compilation of articles, quotes, and thoughts I've put together as I've prepared for my week's podcast.

Read along below if you're interested in learning more.

May be an image of text that says 'Key Numbers' →Net Cumulative Funded Accounts2 Monthly Active Users (MAU)3 18.0M Assets Under Custody (AUC)2 17.7M customers who first-time investors $81B Organic referred newcustomers new customers >50% Financial >80% Ûe'

It is probably a lazy oversimplification to say that the first half of 2021 was a huge moment for Meme Finance, that Robinhood Markets Inc. is the leading brokerage of Meme Finance, and that Robinhood is going public now to cash in on the moment at its absolute peak.

from the risk section in the S-1

A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected.

  1. Robinhood’s customer base wants to buy and sell stocks, options, and cryptocurrencies.

  2. It is very profitable to be on the other side of those trades: If you can sell Robinhood customers the options they want to buy or buy from them the cryptocurrencies they want to sell, etc., you will reliably make a lot of money.

  3. Smart rich electronic trading firms that want to be on the other side compete to pay Robinhood fees for the privilege.

  • 50%+ of its 18M customers are 1st-time investors

  • Asset under custody (AUC) is $81B as of 3/31, avg. $4,500/customer.

  • 2020 revs up 245% y/y to $959M

  • 21Q1 revs up 309% y/y to $522M

  • ARPU (avg revs per user) for Q1 up 66% y/y to $108.9

Keep reading for a deeper look--

Robinhood made $522 million of net revenue in the first quarter of 2021, including $420 million of “transaction-based revenue,” meaning payment for order flow from market makers. Of that, $87.6 million came from cryptocurrencies. Of that, 34% — almost $30 million — was from Dogecoin.

Six percent of Robinhood’s revenue came from Dogecoin trading in the first quarter of this year.

The S-1 does not break out what percentage of Robinhood’s revenue came from GameStop Corp. But the fact that 6% of its revenue comes from Dogecoin seems somehow representative.


The main theme of financial markets for the last year or so has been “fun gambling on meme stocks and meme cryptocurrencies.”

That has not been the main theme of financial markets for the last 20 years. That's not my lived experience.

Arguably the main theme of financial markets for the last 20 years has been “boring and extremely low-fee index-fund investing.”

Robinhood to some extent represents a bet that the tide has turned, that people are sustainably bored of boring investing, that they want fun investing.

Business Lines


Economically, Robinhood is an options brokerage. Robinhood’s main business is convincing people to trade options, and then having options market makers pay to take the other side of those trades.

  • In the first quarter, $197.9 million of Robinhood’s revenue came from payment for options order flow, representing 38% of its total revenue; stocks and crypto were 26% and 17% respectively.

  • At the end of the quarter, Robinhood customers owned $65 billion of stocks, $11.6 billion of cryptocurrency, and $2 billion of options

  • Robinhood extracted about 0.2% of the value of its customers’ stock portfolios for itself, as trading revenues

  • Robinhood extracted about 1.2% of the value of its customers’ crypto portfolios for itself, from trading revenues

  • Robinhood extracted 9.5% of the value of its customers’ options portfolio for itself in the first quarter, $197.9 million of revenue on $2 billion of assets


  1. people may not own a ton of options, but they trade them a lot; you get more volume from options traders than you do from boring stock investors, and

  2. spreads are high and it is lucrative to trade against retail options traders, so market makers are delighted to pay Robinhood large amounts of money for the privilege.

Ex: if you have $1,000 worth of options in your Robinhood account, and you’re an average Robinhood options trader, by the end of the year Robinhood will have made ~$380.


Simple reasoning:

In February, when Robinhood issued the stock it had an absolute lights-out terrific week, early in an absolute lights-out terrific quarter. It did this convertible right after the big GameStop week when millions of people were flocking to Robinhood’s platform and frantically trading GameStop Corp. stock and options. But because Robinhood was so busy, it needed more money... its clearinghouses asked for money it didn't have and blamo.

  • sell stock at a 30% discount you for an immediate 42% loss on mark to market value

  • Robinhood got margin called by its clearninghouse and needed to come up with 3.5 billion in liquidity almost overnight. Had to sell at a discount to rich ppl to come up with the money

  • that money wasn't needed long term but was needed to shore up short term illiquidity problem

from Bloomberg:

Robinhood’s income for the first quarter was a little weird. It reported $114.8 million of adjusted Ebitda for the quarter, its preferred nonstandard measure of profitability, which seems like a nice result for a young fast-growing company. (Adjusted Ebitda for all of 2020 was $154.6 million.) But under generally accepted accounting principles it reported a net loss of $1.4 billion. The difference is mainly due to $1.5 billion of “change in fair value of convertible notes and warrant liability.”

What happened is that, in February, Robinhood sold about $3.5 billion of convertible notes, some of which came with additional warrants to buy stock. The notes and warrants can convert into stock at, basically, a 30% discount to the price in the initial public offering. This means that $3.5 billion of convertible notes will convert into $5 billion worth of stock. (This math does not really depend on the IPO price; it just depends on the $3.5 billion of convertibles and the 30% discount.) That $1.5 billion difference is, economically, a loss to Robinhood: It effectively sold $5 billion of stock for $3.5 billion. Ordinarily selling $5 billion of stock for $3.5 billion does not create an accounting loss, but here Robinhood is using the “fair value option” and marking the convertible to market through its income statement. Robinhood sold $3.5 billion of convertibles in February, and they were worth $5 billion by the end of the first quarter, so it reported about a $1.5 billion loss on the trade.


Robinhood is the brokerage of fanatical retail traders, so when it goes public it is going to sell some of its stock to those fanatical retail traders...

RHF, one of our broker-dealer subsidiaries, is a member of the selling group for this offering. We expect the underwriters to reserve approximately 20 to 35% of the shares of our Class A common stock offered by this prospectus for RHF, acting as a selling group member, to allocate for sale to Robinhood customers through our IPO Access feature on our platform. Any such sales will be made at the same initial public offering price, and at the same time, as any other purchases in this offering, including purchases by institutions and other large investors, and in accordance with customary broker-dealer practices and procedures

Normally in an IPO, the company and its banks allocate shares to big investors, and then the next day small investors like Robinhood customers, etc. get their chance to buy stock. If you allocate shares to the Robinhood traders to begin with — in the IPO, at a price set mainly by the institutional investors who care about valuation — then there will be less of a retail rush to buy stock the next day, and the stock will trade at closer to its IPO price.

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🌊Best Links of The Week🔮

  • EU versus Apple - The EU's Commissioner for competition, Margrethe Vestager, made it clear that Apple will have to allow sideloading, third party app stores or both on iOS, and that Apple can't use privacy or security arguments to stop that.

  • Judges versus the FTC - A US judge threw out a case filed last year against Facebook by the FTC and a group of states, on the grounds that they hadn't actually established there's a case to answer. The case argued first for unwinding the acquisitions of Instagram and WhatsApp, and second that Facebook decisions limiting interoperability with rival apps were illegal. The judge was somewhat unimpressed by the quality of the argument.

  • Bytedance is run from China - Last year Tiktok argued strenuously that there were no privacy or national security issues from tens of millions of Americans using an app owned by a Chinese company because all the data was stored in America. Now a bunch of employees says that wasn't really true.

  • Crypto isnt going away! - Historically, new models of computing have tended to emerge every 10–15 years: mainframes in the 60s, PCs in the late 70s, the internet in the early 90s, and smartphones in the late 2000s. Each computing model enabled new classes of applications that built on the unique strengths of the platform. For example, smartphones were the first truly personal computers with built-in sensors like GPS and high-resolution cameras. Applications like Instagram, Snapchat, and Uber/Lyft took advantage of these unique capabilities and are now used by billions of people.

🌊Canadian Companies Mentioned🔮

  • Relay - relayfi.com - raised a $15m series A in May of this year - Toronto startup - a digital bank designed for growing businesses.

  • Zapper - zapper.fi - also raised a $15m series A in May of this year - Montreal startup - a fintech platform that manages all DeFi assets from one simple interface.

  • Calico raised $100,000 total / Pre Seed Stage from Forum Ventures Jan 1, 2021

    • Calico is a smart production management platform to help brands get to market faster and with fewer production errors