With trading activity and the pace of new user signups both in decline, and SEC chief Gary Gensler seriously considering a ban on its core innovation, payment for order flow, Robinhood is desperate for a return to the explosive growth of 2020. So it's turning to the demographic that has historically been its most reliable cohort of customers: teenagers and twenty-somethings.
With millennials already firmly in its camp, Robinhood is stepping out to try and recruit the up-and-coming Gen Zers by launching a college tour like they're ESPN College Game Day. Robinhood executives are planning to tour community colleges and Historically Black Colleges and Universities this fall. Before that, the company is launching a new promotion: sign up with a college or university email, and you will get a free $15 to trade with (you can buy stocks, options, crypto - whatever) while also being entered into a series of drawings for $20K.
Already, young people make up the bulk of Robinhood's user base. The median age of its users is 31. More than half of its users haven't had a previous brokerage account. And nearly 4MM of them are students.
As investors probably remember from Robinhood's lackluster earnings report, the company needs to do whatever it can to bolster trading activity (so both it and Citadel, its biggest client, can continue to prosper). Some scoffed at Robinhood's boldness in targeting the young and inexperienced.
When asked by WSJ, Robinhood's top flack defended the college push, arguing that Robinhood was simply meeting its customers "where they are".
Aparna Chennapragada, Robinhood’s product chief, said that the marketing push is a continuation of Robinhood’s long-term mission to make investing accessible to people who hadn’t historically participated in the markets. The campaign, she said, is about “meeting the next generation where they are” and communicating that by starting young, college students can enjoy the benefits of compound returns over decades.
The problem is that Robinhood's app has been accused of "gameifying" investing, incentivizing unsophisticated investors into taking risks they wouldn't normally take, or that they don't fully understand. Robinhood is presently being sued by the family of a 20-year-old trader who racked up a massive debt while trading on the app.
Robinhood has also defended its outreach to young people as part of its mission to expand access to investing to people who didn't have it previously (in this case, teenagers).
Still, it's hard to ignore that the $15 in free trading money and other incentives feels like a trap to lure more innocent teenage and 20-something novice traders into the market, where they can be swiftly fleeced by Citadel and Robinhood's other client-partners.
Speaking on CNBC on Wednesday, Gensler pointed out that "most of your trades are going to a small handful of wholesalers...and that's not the lit markets of Nasdaq and New York Stock Exchange that we know."
Asked directly about college students and young people trading meme stocks is a "concern to you," Gensler added that "I think it's positive that more Americans are investing in the market...but investing in the long run is different from day trading...on the app."
"It's better to invest for the long run than try to day trade or hourly trade."
When Jim Cramer asked about how to educate customers about the dangers of trading, Gensler said the SEC and the media need to do everything they can to get the word out and "protect the public."
While the customer has a right to trade when and where they want, Gensler hinted that Congress might soon take on apps that lure teen traders to trade in ways that maximize "profitability" (ie trading activity). "Even disclosure might not be enough," he added.