Robinhood’s wild stock market debut

This is an audio transcript of the FT News Briefing podcast episode: Robinhood’s wild stock market debut

Marc Filippino
Good morning from the Financial Times, today is Friday, August 6th, and this is your FT News Briefing.

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Apple plans to scan personal devices for illegal behaviour and US President Joe Biden is shifting toward a future with more electric vehicles. Plus, Robin Hood’s IPO fell flat last week. Since then, it’s had some pretty incredible ups and downs.

Katie Martin
Robin Hood is not a normal stock. It invented effectively this meme stock craze, this retail trading craze. And, you know, you live by the sword, you die by the sword.

Marc Filippino
I’m Marc Filippino and here’s the news you need to start your day.

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Sources tell the FT that Apple is planning to install software on US iPhones to scan for child abuse imagery. The proposed system is called neuralMatch, and Apple detailed it to some US academics earlier this week. Security researchers are worried that this plan could open a door that would be hard to close and that millions of people’s personal devices could be watched. The FT’s Madhumita Murgia reported the story and has more on why Apple is getting involved in this kind of surveillance.

Madhumita Murgia
For quite a while now, there have been demands from governments, from law enforcement agencies and from campaigners saying the tech companies should be doing more to assist with criminal investigations. And that includes issues around child pornography and terrorism. And this isn’t the first time that tech companies are even using technologies like algorithms to spot specifically child abuse imagery. Microsoft does this on the cloud, and Facebook, on Facebook Messenger as well. So I think this is Apple trying to sort of find that balance between responding to those demands to help with these criminal investigations while also maintaining privacy for its customers.

Marc Filippino
Now we should point out that Apple confirmed its plans in a blog post saying the scanning technology is part of a new suite of child protection systems that would “evolve and expand over time”. Madhu what are critics saying about Apple’s move?

Madhumita Murgia
You know, we talked to a few different security researchers. There’s been a lot of chatter on Twitter as well. People feel that this is just a gateway to large scale surveillance. So obviously, at the moment, the algorithm is focused on spotting child safety imagery. But the concern that researchers expressed was that, of course, they’re supportive of combating child abuse. But really, this would open the door to governments asking for access to other types of content or for the algorithm to be tweaked in order to filter other types of both illegal and harmful content. The other concern that security researchers have is that this could be easily fooled. For example, criminals could backfill the algorithm and find a way to get around it. And so make little tweaks to the images so that it wasn’t picked up by the algorithms. And then the other concern is the other way where you could actually take a very innocent picture and make a few tweaks so that the algorithm kept picking it up as a problematic image if you wanted to target somebody or get them in trouble. So this is just the beginning is what researchers have been saying.

Marc Filippino
Madhumita Murgia is the FT’s European technology correspondent.

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Joe Biden yesterday set a new electric vehicle sales target as part of his climate change initiative. The US president signed an executive order calling for half of all new vehicles sold in the country to be electric by 2030. Senior White House officials say America’s 50 percent target wouldn’t be enforceable, but it would create a market signal that would push carmakers towards electrification. The US is the world’s second largest greenhouse gas emitter. America lags behind Europe and China when it comes to embracing electric vehicles, though the EU basically announced a ban on the sale of all new diesel and gas powered cars by 2035. The UK wants to end the sale of these vehicles by 2030.

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We reported last week that Robinhood’s initial public offering had been pretty disappointing, but a week later the stock surged only to plunge again yesterday. So what is going on here with Robinhood? Katie Martin, our markets editor, is here to explain. Hi Katie.

Katie Martin
Hi, how you doing?

Marc Filippino
All right. So for those unfamiliar with Robinhood’s recent history, could you catch us up to speed?

Katie Martin
I mean, where do you want to start? You know, Robinhood is a brokerage like no other. It totally broke the mould for getting retail participation into public markets in the States. As you say, it listed itself on the stock market and it was a bit drab. Shares fell more than eight percent on day one. And then all of a sudden, everyone goes from talking about how well those you know, there’s a regulatory net tightening around this kind of fun trading to suddenly the shares rocket.

Marc Filippino
Yeah, I want to talk about that a little bit. Can you paint us a picture here of what kind of turnaround are we talking about?

Katie Martin
Oh, like the shares literally gained 80, eight zero percent in like a couple of hours. And the jump was abrupt enough that the stock exchange had to suspend the stocks for a little while and kind of switched back on again and all that sort of thing. And what people are telling us is there’s a bunch of different reasons for that. Possibly the more interesting reason what happened was that suddenly all of the retail traders that kind of gather on online forums like Wall Street bets on Reddit, just the chatter about Robinhood started picking up. And in addition to that, Cathie Wood, who runs the famous Ark Funds, the exchange traded funds. She’s an incredibly famous and successful fund manager. She revealed that she had bought some Robinhood shares. And so all of this just kind of combined to turn the tide incredibly quickly. Just when you thought it was safe to go back in the water kind of thing, pretty much immediately afterwards, the shares fell really heavily, not right back down to where they started, but really heavily double digit decline based on news that the company said some existing shareholders will sell nearly 100 million shares over time. So if you’re one of the people that sent the share price rocketing up 80 percent and you bought at the top, you might have a bit of a bone to pick with this process. But, you know, ultimately, this just tells you that we may as well get used to this. Robinhood is not a normal stock. It’s not a normal company. And it invented effectively this meme stock craze, this retail trading craze. And, you know, you live by the sword. You die by the sword.

Marc Filippino
Now, it’s interesting, while all this is going on, you have Chinese and tech stocks, which had a lot of volatility themselves. They saw massive falls following Beijing’s crackdown on the sector a few weeks ago. And now it seems like retail investors are buying into the dip. What’s going on there?

Katie Martin
Yeah, retail investors are pretty tough. For example, there’s an exchange traded fund, an ETF called KraneShares CSI China Internet, and it’s drawn in over $5bn since the start of July. These are record inflows now it is a Nasdaq index of like big Chinese tech companies. And that lost more than a fifth of its value last month. And the value of this particular KraneShares ETF has fallen by like a third so far in 2021. But even while a lot of institutional investors are still thinking and rethinking their strategy on China, a lot of the retail community has just said, look, here’s a dip, let’s buy it.

Marc Filippino
Who wins out? You know, you talk about the split between the traditional and the retail communities. Where are companies and sectors going to try and appeal to more?

Katie Martin
Well, guess what? That’s the punch line. It’s companies like Robinhood, you know, companies that facilitate this sort of trading of precisely the sorts of companies they’re gonna do well out of this.

Marc Filippino
So Katie, does it even matter how healthy a company is even doing, like do quarterly reports matter or does it just matter that, you know, a company gives out free popcorn or other perks to investors to to try and get them on board? Like, are fundamentals important anymore when it comes to investing?

Katie Martin
Well, you know, that kind of meme that kicks around online, there’s a still from The Simpsons with the old man yells a cloud. Yeah, you’re you’re that old man. [laughs] You’re the one saying, you know hmm don’t fundamentals matter anymore? And to a large extent, no, they don’t. When it comes to certain individual stocks, you can certainly make the argument that they don’t when when you’re talking about meme stocks, they really don’t.

Marc Filippino
Does that put folks like you and I out of a job, Katie?

Katie Martin
No, definitely not.

Marc Filippino
OK, good. [laughter]

Katie Martin
Glad to put that one right

Marc Filippino
Katie Martin is the FT’s markets editor. Thank you, Katie

Katie Martin
No problem.

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Marc Filippino
Before we go, yesterday we told you about the Chinese government and how it’s trying to repair the social contract with the country’s youth, but it looks like young people got caught up in the recent regulatory crackdown that’s supposed to ease the pressure on them. So you remember those edtech bands from Beijing that Katie and I were just talking about. Experts say those regulations banning private education companies from making profits has put many college graduates’ jobs at risk. Tutoring and joining education companies were among the most popular jobs for young people. With these opportunities closing down, though, young people might spend more time trying to find other jobs and as a consequence, make the decision to start a family a lot later. And it’s a big deal because the jobless rate among the under-25 age bracket is three times higher than the national average.

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You can read more on all of these stories at FT.com. This has been your daily FT news briefing. Make sure you check back next week for the latest business news.

The FT News Briefing is produced by Fiona Symon and me, Marc Filipino. Our editor is Jess Smith, our intern is Zoe Han, with help this week from Gavin Kallmann, Michael Bruning, Jennifer Ablan and Persis love. Our theme song is by Metaphor Music.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.