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Ahead of IPO buzz, Robinhood introduces new premium trading features

Key Points
  • Robinhood's push to become a millennial investor's one-stop shop gained momentum yesterday with the announcement of new premium features to their Gold membership.
  • It's the latest play by the company that operates a zero-fee stock-trading app that has become popular with younger investors.
  • Now, for $5 per month, eligible members have access to larger instant deposits and $1,000 of interest-free deposits for users who choose to invest with margin.
  • Gold subscribers now have access to Nasdaq Level 2 market data and more than 1,500 exclusive research reports from analysts at Morningstar.
Baiju Bhatt, co-founder and co-chief executive officer of Robinhood Financial LLC.
David Paul Morris | Bloomberg | Getty Images

Robinhood's push to become a millennial investor's one-stop shop gained momentum yesterday with the announcement of new premium features to their Gold membership. It's the latest play by the company that operates a zero-fee stock-trading app that has become popular with younger investors. Its goal, said co-CEO Baiju Bhatt, is to democratize America's financial system by making investing accessible to the little guy.

In 2016 the company introduced "Robinhood Gold," offering users instant deposits and reinvesting, pre-market trading options and personal borrowing benefits for $10 per month. Yesterday the company rolled out a new suite of features at half the original monthly cost.

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Now, for $5 per month, eligible members have access to larger instant deposits and $1,000 of interest-free deposits for users who choose to invest with margin. Additionally, Gold subscribers now have access to Nasdaq Level 2 market data and more than 1,500 exclusive research reports from analysts at Morningstar.

In a recent company blog post, Robinhood claimed that the new features are part of a "continued effort to help [users] make more informed investment decisions."

In December, the company announced a plan to go after banks by offering a cash management account with an interest rate roughly 30 times higher than the national average. But it has not been rolled out to customers after blowback from regulators who said they had not been consulted. "As a licensed broker-dealer, we're highly regulated and take clear communication very seriously. We plan to work closely with regulators as we prepare to launch our cash management program, and we're revamping our marketing materials, including the name," the company said in a December blog post.

After entering the crowded trading arena six years ago, Robinhood quickly positioned itself in fintech with a revolutionary no-fee model catered to younger, less-experienced traders. It now has more than 6 million users.

By sidelining commission fees, the company's bottom line relies on these premium paid subscriptions, in addition to order-flow payments, rebates from market makers and interest paid on margin accounts. And for Gold members who choose to invest with margin, that interest is now only 5% annually on amounts borrowed above their first $1,000 in margin.

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For investors interested in trading traditional stocks, ETFs and even cryptocurrency, Robinhood has not only kept cost low but done so in a big way — claiming to have saved its users more than $1 billion in fees as of early 2018. And that's also paid dividends for a company that's eyeing a clear plan to go public in 2019.

CNBC reported that the stock-trading unicorn closed a $363 million Series D funding round last May, valuing them at $5.6 billion — quadruple from the year prior.

Like many tech companies going public this year, Robinhood is still losing money. And if profitability hasn't proved to be enough of a challenge, Securities Investor Protection Corp. expressed "serious concerns" about covering the insured checking and savings accounts the company announced it would be offering this past December.

"We plan to work closely with regulators as we prepare to launch our cash-management program, and we're revamping our marketing materials, including the name," Robinhood said in a December blog post from the company.

But between their new premium trading features and last month's acquisition of financial media company MarketSnacks, the company continues to diversify its value propositions in preparation for a likely IPO in 2019. Though Robinhood co-CEO Bhatt has confirmed plans for their public debut, an exact date has not yet been revealed.

Robinhood has been named to the CNBC Disruptor 50 list for the past two years, ranking 38th in 2018.

The 2019 CNBC Disruptor 50 list will be revealed in May.

Correction: Robinhood's cash management account was not launched in December as the company continues to work with regulators on approval.

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Key Points
  • Lyft shares tumbled Wednesday following skepticism around its valuation and reports that Uber will unveil its public offering Thursday.
  • New York University professor Aswath Damodaran said on CNBC's Fast Money Tuesday that Lyft should be traded closer to $59 per share with a valuation of $15 billion, which would shave about $2.5 billion from its current market capitalization.
  • Uber is expected to seek a valuation of $90 billion to $100 billion.