By Jacob Wolinsky. Originally published at ValueWalk.
Following is the unofficial transcript of a CNBC exclusive interview with Robinhood Markets Inc (NASDAQ:HOOD) CEO Vlad Tenev on CNBC’s “Power Lunch” (M-F, 2PM-3PM ET) today, Tuesday, May 17th. Following is a link to video on CNBC.com:
Whenever People Think Crypto Is Over, People Build New Products: Robinhood CEO Vlad Tenev
KATE ROONEY: Alright, thanks Julia. Vlad, it’s great to see you in person. You just got off stage. We’re here at the Permissionless Conference, which is a crypto conference and we’ll get to some of the news you had out today. But it is good to see you. Thanks for joining us.
VLAD TENEV: Yeah. Thanks for having me. It’s good to see you too.
ROONEY: Of course. Well, I want to start with the markets. Crypto is getting crushed, stocks are down and individual traders are just trading a lot less than they were say a year ago, for example. How are you looking to growth and where are you looking for growth in the near term? What should shareholders know if they’re trying to be confident in investing in Robinhood, what should shareholders need to know about the future of the company?
TENEV: Well, from the very beginning Kate, we started Robinhood with the idea that we should challenge the status quo. Brokerages were charging expensive commissions, they had account minimums, and Robinhood came in there and changed the entire business model. And you kind of see the same thing happening in crypto right now. You see lots of companies charging customers high fees, it being kind of the realm of early adopters. And I think with with this product in particular, we have we have the opportunity to do that again to challenge the status quo and make something that was accessible to only a select few accessible to a much broader mass market audience and that gets that gets us very excited.
ROONEY: And so the product you’re announcing today essentially lets users hold their own cryptocurrency and NFTs. It really puts you in direct competition with Coinbase for one among other startups, but you’re doing this no fee model that you just mentioned. How can Robinhood afford that? Are you subsidizing the fees and what is the revenue look like here on the back end?
TENEV: Well, I think it’s yeah it’s a question that’s a couple of steps ahead. So our primary objective is to give customers a great product, right, to give them the opportunity to not just trade through the centralized exchange of Robinhood but also keep complete control and custody over their keys and we’ll help them access decentralized exchanges and swap coins. The revenue model once we, once we deliver a product that we think customers will really really love, looks really good, the revenue model takes care of itself. But our focus is on just making sure that you know this is the way for our customers to access Web3 and maintain self-custody going forward.
ROONEY: And so your customers are going to plug into other exchanges. You mentioned in the release something about earning yield on stablecoins, for example. There was a huge, huge incident last week with Terra Luna, that really collapsed. Are you worried at all about the liability for Robinhood? If you connect a customer to say a decentralized exchange that goes through a hack, how did you get your regulators comfortable with that?
TENEV: Well, the way we think about it is it’s not unique to crypto. I mean there’s certainly lots of projects, not all of them are going to succeed. But you have, you know, incidents like that happening in the traditional equities markets. You see it happening in currencies historically and I think it can be tempting to be wrapped up in what’s happening week by week. But you look at all the protocols that are popular today. Some of them have been really successful. You see the companies behind them, or the Dows at this conference, they were all largely built during crypto winter. So when everyone says oh crypto is is over, that was fun while it lasted. People put their heads down and they build and they build these great products and that’s what we’re excited to do. I think now is actually the best time to build.
ROONEY: Got it and Julie Boorstin back in the studio has got a question for you, Vlad.
JULIA BOORSTIN: Thank you, Kate, and thank you Vlad for joining us. Vlad, there’s no question that Robinhood dramatically disrupted the financial services industry and brought in so many new traders to the market. But my question is, you know, after a year after you were number one on the Disruptor 50 list, here you are now you have a lot of the incumbent banks changing their offerings, and you have consumers whose behavior is just fundamentally different than it was a year or two years ago. How concerned are you about competing with the giants as they try to copy what you’ve been doing?
TENEV: Well, we feel very confident. I couldn’t be more confident in the future than I am now. And I’ll tell you Robinhood this past quarter, you’ve seen all the new products that we’ve been rolling out and it’s not just Robinhood three, the Web3 wallet, but things like stock lending, the 1% APY on your uninvested cash that we announced last week. You know we’re we see opportunities to serve our customers and pass back more value and challenge the status quo in all market environments and I think this, it’s a very exciting challenge for us in the company. We want to make sure to serve customers well in high inflation environments, low inflation environments, every every opportunity we get and you’ll see us continuing to do that.
ROONEY: And Vlad, speaking of competition, we had Sam Bankman-Fried, the CEO of FTX, buying a 7.6% stake in Robinhood. Did he approach you about this first? How did you find out that he was going to take a stake in Robinhood and does it make you worried at all from a competitive standpoint?
TENEV: No, I wouldn’t say it makes me worried from a competitive standpoint. I mean we have, we’re a public company. We have lots of shareholders. We’re a company that is all about democratizing access to public markets and cryptocurrencies so happy to happy to have shareholders involved in the company.
ROONEY: Did he call you up? What was or have you ever met Sam in person?
TENEV: I have I have met. Sam I mean, we’ve we’ve shared some similar investors when we’re private companies. Smart guy. Yeah. So I’ve spoken to him over the years.
ROONEY: Got it. And speaking of big name investors, Warren Buffett and Charlie Munger have been among your loudest critics. I don’t know if we’ve ever gotten a response directly from you when it comes to what they’ve said at some of the annual meetings. Most recently, Charlie Munger said that Robinhood was quote, “Unraveling for its disgusting behavior and that God is getting just.” Tough words from a well named investor, well known investor, what’s your response to that?
TENEV: So if if Warren Buffett and Charlie Munger were getting started today, I have no doubt that they’d be Robinhood customers.
ROONEY: Do you think they’d be using the platform?
TENEV: I have, I have no doubt that’s how if they were getting started today for sure.
ROONEY: And what’s the investing behavior? We’ve talked a little bit about the slowdown in trading behavior, how are investors handling what may very well be their first bear market?
TENEV: Yeah, I mean, we’re seeing we have lots of different types of investors on the platform. So first timers, obviously is what we’ve been talking about, but we have lots of advanced investors as well so customers coming to Robinhood for our competitive crypto offerings, customers that actively trade options and, you know, during this time, I think it’s a great opportunity for us to get closer to their needs, understand them and and build great products for them. So a couple of things that I’ve announced in the recent past, hyper extended hours trading, which allows customers to take advantage of a longer trading day, as well as the eventual goal of making equities markets 24/7. These are all examples of us kind of catering to a big and important audience for us which is those those active more advanced investors.
ROONEY: Got it. I want to ask you about employee morale as well. We had Coinbase this morning saying it’s slowing down hiring. Robinhood cut about a 10th of its workforce. I’m sure that was a tough decision. But I wonder in terms of how you’re keeping employee morale up, how you’re keeping customers I mean employees at the company when their net worth may be cut in half from where it was a year ago. I wonder if you can tell us a little bit about how it is and how your discussions have gone with employees internally at Robinhood who may just be feeling down about where the stock price is right now.
TENEV: Yeah, the way we like to think about it is is Robinhood needs to go through market cycles and prove that we’re a company that has very, very exceptional cost discipline so it’s about cost discipline. We obviously know that when, you know, the Fed is sending stimulus and the markets are going up and interest rates are low that things are things are great and it lifts all boats, but I think it’s the companies that exercise that discipline and show that they can stand the test of time through rough market conditions that that really separates, separates companies and and that’s our goal. I think we’ve been cost disciplined from the from the very, very beginning and this is just an opportunity for us to display that excellence over and over again.
ROONEY: Got it, well Vlad a lot has happened since the IPO. We appreciate you sitting down with us. Tyler, I’ll send it back to you in the studio.
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