supster (u/supster) - Readit News

supster commented on Spotify files for its IPO axios.com/exclusive-spoti... · Posted by u/rahulchhabra07

bogomipz · 8 years ago

>"When you buy Apple Stock it's not from Apple."

How are these two comparable? When Apple IPO'd back in 1980 you were buying stock from Apple.

>"...but they are probably not raising money because they either don't need it or believe they can get better funding terms."

They lose hundreds of millions of dollars year over year, why would they not need it? Also why would they believe that they can get better funding now when they resorted to selling debt with unfavorable term intheir last round of financing?

supster · 8 years ago

An IPO provides 1) a fundraising opportunity 2) a liquidity event 3) an opportunity to fulfill contractual obligations

One of the conditions of their recent debt financing was that they IPO within a certain time frame. If they believe that they don't need additional funding at the moment or can get better terms then they are simply fulfilling criteria #2 and #3 with their unique IPO. I imagine Spotify can get decent debt financing terms b/c they have such a steady and predictable source of revenue (though not necessarily profit).

supster commented on Dropbox Reaches Key Profit Milestone bloomberg.com/news/articl... · Posted by u/pacaro

biot · 8 years ago

Famously, WhatsApp supported 900M users with only 50 engineers: https://www.wired.com/2015/09/whatsapp-serves-900-million-us...

While support staff definitely increases with users (paid or not), beyond a certain size the number of engineering staff should be largely independent of user count. As long as you are able to run 24/7 ops, manage outages and incidents, scale appropriately, etc. the only variable should be how rapidly you need to build and maintain your software. The rest of the complexity is all handled via automation.

supster · 8 years ago

Since Dropbox is making a big push into enterprise, they are hiring a ton of high touch enterprise sales people - who can't scale in the same way an engineer can.

supster commented on Dropbox Reaches Key Profit Milestone bloomberg.com/news/articl... · Posted by u/pacaro

JumpCrisscross · 8 years ago

If the depreciation schedule is too aggressive, the solution isn't to ignore it but to rework it based on longer useful life assumptions.

supster · 8 years ago

Accelerated depreciation schedules often have tax benefits compared to linear depreciation schedules.

See here for more info: http://www.investopedia.com/walkthrough/corporate-finance/2/...

supster commented on Robinhood stock trading app confirms $110M raise at $1.3B valuation techcrunch.com/2017/04/26... · Posted by u/jbernardo95

skylark · 8 years ago

But how is competing on price a business model in and of itself? Surely Etrade can do the same thing, right?

supster · 8 years ago

So majority of the brokers have brick and mortar operations that can't afford to compete on price. That leaves only the online brokers. Then the next step is to build a brand that attracts customer trust/loyalty, which is what Robinhood seems to be doing and to build a really nice experience which they do with their slick apps. Once customers (generally young ppl who are first time investors) are invested in the Robinhood platform, then Robinhood can up sell them on additional features/services (margin, options, API access etc). So sure Etrade could compete on price (I doubt they would want to since it would immediately hit the bottom line vs a new company not depending on broker fees), but if you look at it from a long term perspective eliminating broker fees is just step 1.

supster commented on Robinhood stock trading app confirms $110M raise at $1.3B valuation techcrunch.com/2017/04/26... · Posted by u/jbernardo95

mr_turtle · 8 years ago

What's the long play then? Surely Robin Hood isn't absorbing the the transaction fees as a loss leader just to increase it's user base? If that's the play, any other company can emulate that.. The incentive seems to be this may cause a price war with existing brokerages.

supster · 8 years ago

The long play is that it actually doesn't cost significant money per trade at an institutional level. The only reason the other major brokers charge you money is because it covers their brick and mortar retail costs (e.g. Scottrade) and it adds to the bottomline (e.g. Etrade). So Robin Hood is actually just giving this surplus to the consumer instead of keeping it for themselves, and building a user base / brand in the process. Eventually once they have enough users, they will start to up sell you for other services (e.g. checking/savings, margin trading, options trading, check writing etc).

supster commented on Robinhood stock trading app confirms $110M raise at $1.3B valuation techcrunch.com/2017/04/26... · Posted by u/jbernardo95

jessriedel · 8 years ago

> Robinhood also earns money from rebates its gets for directing its order flow to broker dealers, though Bhatt insists “We do not sell data to anyone. We have never sold data to anyone. We just do not do that.”

Just so everyone knows, order flow from unsophisticated investors is considered a valuable resource because, when filling it, you know that you're more informed than the person trading against you.

supster · 8 years ago

True, but all major retail brokers sell their order flows to HFTs (e.g. Etrade used to sell its order flow to Citadel), so this is nothing new

supster commented on Robinhood stock trading app confirms $110M raise at $1.3B valuation techcrunch.com/2017/04/26... · Posted by u/jbernardo95

AndrewKemendo · 8 years ago

“But ‘how are you going to make money long-term?’ has been a question mark” Bhatt says. Gold has answered that question.” A Gold subscription lets users borrow up to double the money in their account to trade on margin with leverage

Wow, so that's effectively opening up new easy to get credit vehicles for unsophisticated investors. How could that go wrong?

Even if you are a professional trader you'll take a bath on margin over the long run. They are incentivizing what is effectively borrowing for gambling and that is their long term revenue strategy? Might be a great money maker but it certainly is playing with some really big barrels of fire.

"Three things ruin people: drugs, liquor, and leverage - Charlie Munger"

edit: The point here is not that Margin is a new service, yes every brokerage has it, it's that it is irresponsible to use Margin if you are not a sophisticated investor. Its even more irresponsible to push leverage onto unsophisticated investors.

Not everyone is going to understand the risks of leverage and if Robinhood makes it as easy as candy crush to trade on leverage, enough gamified users are "playing" stock market with real money and a margin call happens during a huge downturn, it will be exceptionally nasty.

supster · 8 years ago

True, but all major retail brokers allow investors to trade on margin (and charge you interest on it), so this is nothing new.

supster commented on Robinhood stock trading app confirms $110M raise at $1.3B valuation techcrunch.com/2017/04/26... · Posted by u/jbernardo95

malanj · 8 years ago

My understanding is that if you trade through a platform like this, that's monetizing through order flow, you're getting screwed by HFTs. I.e. AFAIK Robinhood doesn't need to be selling the data to HFTs (which they don't do), for you to get screwed by them.

Anyone here in the space who can quantify the "hidden" cost you incur because of more sophisticated traders trading against you?

It feels like working with a broker who's explicitly charging you might actually be cheaper if you take this "cost" into account?

supster · 8 years ago

All the major retail brokers sell their order flow, so you generally eat this cost no matter who you use. In addition, the hidden cost is fractions of a penny on the dollar (so still better than the $5-7 a regular broker charges per trade anyways).