Back in early February, hundreds of retail investors—many of them novices infatuated by meme stocks and looking to learn more about the market—gathered on trading app Public.com to pick the mind of high-profile stock-picker Cathie Wood via the platform’s chat feature.
The stock market had just posted its worst month since the pandemic-induced crash in March 2020, and one user, who started investing last year and bought AMC stock during its massive 200% run-up in May, kicked off the event with this question: “What advice would you give to those who dream about the future, but wake up to a bearish market?”
“While market volatility may be elevated in the short-term, we would reiterate the importance of maintaining a medium to long-term time horizon,” responded Wood, the CEO of New York City investment firm Ark Invest, which offers exchange-traded funds focused on growth and technologies. She also emphasized Ark’s bullish forecast that the market value of companies with disruptive innovations, such as Tesla, will swell to $210 trillion by 2030 from $14 trillion in 2020. Hundreds of questions poured in for Wood, who ultimately answered a couple dozen.
One of Public’s inaugural town hall events, the Q&A has since been viewed more than 2.7 million times on Public’s app, while about 20 other companies—including tax-software firm Intuit, language-learning app Duolingo and fintech lender Affirm—have signed up to hold their own town halls, which make up a hallmark of New York City-based Public’s new product, Pulse. Officially launched on Tuesday, Pulse features three main offerings for companies looking to engage with and draw insights from their retail investors: Town halls, questionnaires and data insights on trading behavior.
“Public companies have an obligation to share information to all investors equally, and as retail rises in dominance, investing apps like Public suddenly have this accumulated audience they can reach,” says Public Co-CEO Leif Abraham, likening Pulse to investor relations for the modern investor.
Pulse also gives companies the ability to survey their retail investors after transactions about why they bought or sold a stock—whether something in the news or a comment from company management, perhaps, motivated the trade. Additionally, the platform houses anonymized data on retail-trading behavior for individual stocks, providing a dashboard with statistics on social media sentiment, length of investor retention and trading activity over time. Public wouldn’t share pricing details but said many of its corporate clients—which include buzzy cannabis stock Tilray and Dubai ride-hailer Swvl—are on recurring subscription plans.
“The biggest commonality in all of our conversations with these companies is they don’t understand the [retail] audience, and they don’t really fully understand what motivates them to make decisions,” says Katie Perry, a general manager of investor relations at Public. “This is helping them understand the audience, so they can better serve them.”
For now, Pulse will only be sold to publicly traded companies and ETF issuers, like Ark.
Public’s new offering marks an essential move for a trading platform that’s free to investors but refuses to take payment for order flow—the controversial practice in which brokers like Robinhood send trade orders to market makers, who execute those trades and kick back a portion of the profit. More than 77% of Robinhood’s $1.8 billion in revenue last year came from payment for order flow, but Public last February denounced the revenue stream, which critics argue can lead to inferior prices for investors. Instead, it’s pursued revenue-generating measures like optional tipping by retail clients and interest on uninvested cash balances. Like Robinhood, competitors Webull, eToro, M1 Finance and Stash all sell order flow.
“If regulators were ever to outlaw payment for order flow, Robinhood’s revenue would be severely affected,” says David Trainer, the CEO of investment research firm New Constructs, positing a ban would force exchanges to drop free trading and put them at a “significant disadvantage” to rivals Fidelity and Charles Schwab. SEC Chair Gary Gensler last August said a full ban was “on the table,” but analysts predict stricter regulations may be more likely.
Still, there are other headwinds for the retail-trading industry. Last week, JPMorgan analyst Kenneth Worthington cautioned the stock market’s recent selloff has “hobbled” growth and activity for trading platforms in what is typically the strongest quarter of the year. Robinhood stock has plummeted 61% since its public-market debut in July.
Public was cofounded in September 2019 by a team including Abraham’s fellow co-CEO, Jannick Malling, and professional trader Matt Kennedy. It has raised more than $300 million from investment firms including Accel, Greycroft, and Tiger Global Management, as well as celebrities like Will Smith, The Chainsmokers and tennis champion Maria Sharapova. The company, last valued at $1.2 billion, declined to disclose revenue but said its user base has exploded from less than 1 million at the end of 2020 to about 3 million—fast growing but still dwarfed by older competitors like eToro (23 million), Robinhood (17 million) and Stash (6.5 million).
“It’s been a crazy year,” says Abraham, who chalks up the growth to ballooning interest in the stock market—spurred by pandemic shutdowns and a flurry of consumer-facing companies, like Robinhood, Airbnb and Coinbase, going public. “With all sports shut down, the stock market became the last arena that was still open, and now people found other teams to rally behind too—these companies.”