The list of sacred things profaned by millennials is a long one, ranging from napkins to diamonds to sex. But one of the keenest blows the generation has landed on the American way of life has been their reluctance to bet on the stock market. Partly for lack of funds, partly out of suspicion of Wall Street, millennials have kept their speculating to a minimum. That's a problem. How can the gears of the public markets continue to turn without an inexhaustible supply of credulous traders willing to hand over profits to the better-informed?
Luckily, Robinhood is up for the challenge. In the days after Snap Inc's ludicrously overblown IPO, Robinhood, the almost-free mobile trading app beloved by millennials, recorded a massive surge in trading, with 43 percent of its users active that day loading up on fresh new Snap shares. From USA Today:
“Snap’s IPO revitalized investing among the younger generation,” notes Baiju Bhatt, the co-founder of Robinhood, whose core audience is primarily 18-24. “We also saw a surge in new accounts, with many new customers opening up their first brokerage account."
The median age of Robinhood investors buying Snap on Robinhood has been 26, the same age as Snap CEO Evan Spiegel.
It's no surprise to see Snap, the unabashed thirst trap of the stock market, gaining favor so heavily among young investors. Here's one of them:
Chris Stearns, 30, who lives near Virginia Beach, bought 13 shares Friday morning because he sees Snap as the next Facebook. “Snap is the first IPO-centric stock I’ve taken,” he says. “It’s a huge growth opportunity." Stearns, who works with his dad putting in glass in homes and businesses, says that every person he’s hired over the past few years in their 20s was always on Snapchat. “They use it constantly.”
Ryan Eshagi, an 18-year-old freshman at the University of California, Irvine, said he became "addicted" to the app when he was in eighth grade. "It defined the way teens and young adults communicate with one another," he says. He bought 20 shares, financed by his part-time job helping high school students with college applications, and plans to hold onto the shares for quite some time.
Like Twitter and Etsy before it, Snap has earned itself a customer base loyal and demographically appealing enough to distract investors from the fact that the company isn't really making all that much money. And like those two august predecessors, Snap's shares have begun tanking now that the IPO euphoria has worn off. In the long run, obviously, it's too soon to tell how Snap will fare. But in the short run, it seems Snap's IPO did exactly what it needed to do: deliver short-term gains to pros who have already sold off and counted their winnings.
Any trader who had good fortune selling the Snap pop should thank Robinhood for providing a surge of eager millennial buyers. “Our mission,” the app boasts, “is to democratize access to the financial markets … to empower this new generation to take greater ownership in their financial future, which we believe can help shrink the gap between the ‘haves’ and the ‘have nots’ and lead to a healthier, more robust global economy.”
While it's hard to quibble with notion that stock ownership is essential to retirement planning, the idea that frictionless retail stock trading will boost the financial fortunes of the meek warrants scrutiny. Most day traders lose money, get discouraged, and quit. All Robinhood has done is provide a sleeker and cheaper way for the naive to hand over their cash, as Snap's IPO has illustrated.
This isn't to fault Robinhood's product, just its purportedly egalitarian branding. Its namesake, as we all know, took from the rich and gave to the poor. Robinhood's disruptive innovation seems to be persuading the poor to unknowingly hand their money over to the rich.