Robinhood Duo Ride Trading Frenzy to Billionaire Riches
(Bloomberg) -- Vlad Tenev and Baiju Bhatt, the Robinhood Markets Inc. co-founders who drew a generation of young people into investing on their phones, are officially billionaires.
Robinhood’s stock closed at $34.82 Thursday in its first day of trading in New York, down 8.4% from its initial public offering price of $38. That put the net worth of Tenev, the company’s chief executive officer, at $2.2 billion, according to the Bloomberg Billionaires Index. Bhatt, who shared the CEO duties until last year, is worth $2.5 billion.
The initial public offering cements their spots among America’s super-rich, and marks the pinnacle of a journey that’s helped usher in an era of no-fee stock trading.
And the company went about the process in its own way. Robinhood published its investor roadshow presentation online and sold about a quarter of the offered shares to its own users -- allowing them to get in at the same price as Wall Street investors.
It doesn’t appear the strategy generated the kind of excitement they were hoping for, with the shares dropping below the IPO price as some posters on Reddit, the platform that help fuel the meme stock trading frenzy, urged would-be investors to avoid the offering.
It’s been eight years since the pair released the first iteration of their Robinhood app, which initially was a community for stock-picking and investment advice and later morphed into a trading platform. They developed the idea after seeing the Occupy Wall Street protests in New York’s Zuccotti Park in 2011 and wanted to help introduce more people to investing.
Today, 17.7 million people use the app each month. More than half of which are first-time investors.
Tenev, 34, said in a 2016 interview that his wife, Celina, accidentally came up with the company’s name when trying to explain what Bhatt and her husband were up to: “She’d say, ‘They’re in finance, but they’re not investment bankers or traders or anything like that. They’re the Robin Hood of finance.’”
In an unusual twist, both Tenev and Bhatt, 36, have put some of their Robinhood shares in a trust that’s controlled by the other person. Bhatt has allocated more than 3.7 million shares -- 5% of his total stake -- to two grantor-retained annuity trusts, which allow him to pass on share price gains to beneficiaries without incurring wealth-transfer taxes.
Both have a shot at receiving additional shares worth hundreds of millions of dollars if the firm’s stock price rises in coming years.
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