Robinhood CEO discusses the brokerage's evolution leading up to another ride on the meme stock wave

SAN FRANCISCO (AP) — Meme stocks like GameStop are hot again, reviving memories of early 2021 when they turned into a craze that ended up burning many investors along with Robinhood Markets. The online brokerage was especially popular among younger generations helped propel the meme stock boom until it became so overwhelmed that it suddenly clamped down on trading. That move outraged many customers who blamed the brokerage for losses, sparking inquiries by lawmakers and triggering lawsuits.

Robinhood has enjoyed a far more stable ride on the latest meme stock wave, an improvement that CEO Vlad Tenev credits to the brokerage becoming more mature and diversified as it expanded into retirement and credit card accounts.

Tenev, 37, recently discussed Robinhood's evolution and the challenges of running a publicly held company that has seen its stock price fall about 40% below its July 2021 IPO price of $38). He also brushed off the threat of a federal regulatory investigation into Robinhood's cryptocurrency arm that is now expanding with a $200 million acquisition of the crypto exchange Bitstamp.

Q: How are you feeling about the investing environment now compared to a few years ago?

A: I felt a little nervous in 2021. Not only were we growing so quickly that I didn’t think our infrastructure could handle it, but we were also spending so much of our resources just trying to keep up with our growth that we couldn’t really build new products that would serve as our next growth drivers. The foundation is much better now. You are seeing this with the latest meme stock frenzy. Not only are we reliable and up, but we are one of the few places where you can trade these things 24 hours a day. That’s a huge differentiator.

Q: Have you and the company also become smarter?

A: We have learned a ton of lessons. The first lesson I learned is you should not go down and have infrastructure issues. That’s a hard lesson, but we have made a lot investments so we are doing pretty well now. The other lesson is to be much more proactive about what’s happening. I have been on social media a lot more. I think that communication muscle is much more developed.

Q: Are you trying to do any financial education with customers?

A: One is just informing people about things like back in 2022 when we were in the news a lot because people were using Robinhood to buy bankrupt stocks. Some people made a lot of money doing that and, in hindsight, that ended up being a good trade. But we don’t want people trading it without knowing it’s bankrupt. So we added a lot of things to the product like, “This company has declared bankruptcy, so watch out.” I don’t know if you call that education, but it’s contextual content that helps people make sure they are informed.

Q: What are the demographics of your core customer base?

A: We have 24 million customers with money in their accounts in the U.S. They skew younger — some Gen X, but mostly millennial and Gen Z with incomes of $100,000-plus. A lot of them have kids now, a lot of them have cash and they tend to love sports and business and entrepreneurship. We have also gotten older customers because of new products like our high-yield savings offering. We have also been doing a lot with offers to move your existing retirement accounts and taxable accounts to Robinhood. The whole philosophy behind Robinhood is how can we take something that only wealthy people have, democratize it and then give it to everyone.

Q: What about the recent notice from the Securities and Exchange Commission informing Robinhood that it may be subject to enforcement for alleged violations in its cryptocurrency operations?

A: I really think that it’s regulatory overreach. There’s regulation by enforcement happening. We worked with (the SEC) and we had a proposal that we thought was quite to create a special purpose dealer for the trading of crypto assets. We met with them 16 times, and then we just got an email saying, “We don’t see a point in meeting anymore.” So here we are.

Q: What has it been like making the transition from being a founder running a startup to being CEO of a publicly held company?

A: It was definitely a learning experience. We have had to adapt the business and do a lot of hard things that were painful. I had some earnings calls that were not fun. At the end of the day, there were some really good things that maybe we wouldn’t have done if we were private that we ended up doing, helping make us a stronger company. It has made me better as a human being and as an executive. I wouldn’t take it back for sure.

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This interview has been lightly edited for clarity.