SCOTT GALLOWAY: Robinhood may seem like a roaring success, but 5 red flags make its business model unstable

SCOTT GALLOWAY: Robinhood may seem like a roaring success, but 5 red flags make its business model unstable

Robinhood went public on Thursday, the old-fashioned way — via an IPO with underwriters after a roadshow. The IPO priced at $38 per share, yielding a valuation of $32 billion, and closed its first day of trading down 8.4%. The trading company's debut is the among the 51 US firms that have raised as much cash as Robinhood. (Disclosure: I am an investor in Public.com.) So what will $30 billion buy? At first glance, Robinhood is a roaring success. In 2020 it registered revenue of $959 million, a 245% increase from 2019. RH boasted 18 million monthly active users in March 2021, up from 7 million a year prior. And in keeping with the company's thesis, female users tripled over the past year and more than 25% of users are now people of color, significantly more than at the incumbent brokerage houses. However … I've written before about the of investing. The company preys on human weakness, in particular young men's susceptibility to gambling addiction. That's still true, and RH's IPO warrants a deeper dive into the firm's business model. The company operates a mobile app that enables consumers to trade stocks, options, and crypto. These orders are the company's