What Happened With Robinhood? Plus: Latch's SPAC Merger and More

In this installment of Industry Focus: Financials, Fool.com contributor Matt Frankel and host Jason Moser give their take on the short squeeze situation, as well as the issues surrounding Robinhood's decision to limit trading in several high-volume tickers. Plus, we'll dive into the upcoming IPO of Latch, which is going public via SPAC merger with TS Innovation Acquisition (TSIA), as well as Loan Depot's IPO, which will be the latest in a string of high-profile mortgage IPOs. Plus, we answer a listener question on Coinbase and share two stocks we're watching this week.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on February 1, 2021.

Jason Moser: It's Monday, February 1st. I'm your host, Jason Moser. On this week's Financials show, we're catching up with the latest in the GameStop (GME 2.56%) debacle. Yes, it's a debacle, folks. It qualifies as an official debacle. We're going to take a look at a couple of upcoming IPOs that investors may want to keep an eye on. We'll answer a listener question, and we'll wrap it up with ones to watch. Joining me this week, as most weeks, it's Certified Financial Planner Matt Frankel. Matt, how's everything?

Matt Frankel: As good as it could be expected with this weather we're getting all over the country. And I have it better than most. [laughs]

Moser: Yeah. We got the Nor'easter up here in Northern Virginia. We haven't had a whole heck of a lot of snow here in the past few years, but we made up for it last night and today.

Frankel: I'm glad you have power.

Moser: Yeah. Thankfully, we do have power. We have power, we have heat, had a fire going all day long yesterday in the fireplace. There are worse places to be than shut in the house with the fireplace and full power, and TV, and Internet, all that stuff. It's OK. [laughs]

Frankel: Yeah, for sure.

Moser: Well, Matt, let's kick off this week's show with clearly a story that's gotten a lot of attention over the past week. It really deservedly so. This has become something for the history books, I think. We can go a million different ways with it, but it is the GameStop situation with Robinhood. When we say GameStop, there are other stocks including there, AMC (AMC) being one. Last week, this story really unfolded, and it took a lot of weird turns and left a lot of individual investors feeling left out in the cold, to be honest.

But let's open up with this GameStop story and talk specifically right now at least. We're not going to dig in. Everybody knows what's happened here at this point. Let's talk about Robinhood in particular, because we're a financial show. Robinhood, we talked a lot about it here over the past year plus, and how it's working to democratize investing for all and really bring it to more people. I think you and I both agree that is a very admirable mission and something we can get behind. It also comes at a cost. The way that Robinhood's business model was set up, we're starting to see the vulnerabilities there, and it is certainly playing out. I got to imagine their leadership has a few more gray hairs today than they did a week ago.

Frankel: When you compare Robinhood to some of these big brokers that have $1 trillion under management or something to that effect, they just don't have the capital to allow for frequent trading in these stocks that are being short squeezed that are spiking, and GameStop is just one of them. At one point, Friday I think, Robinhood put out a list of 50 stocks that it was restricting.

Moser: Starbucks was on that list.

Frankel: General Motors was.

Moser: That seemed a little bit out there. [laughs] Maybe there was a faulty AI, I don't know.

Frankel: They've backed off a little bit. But on some of the high-volatility stocks, it's like GameStop is still limited to 4 shares. Jason tried to buy 5 before the show and he couldn't do it. [laughs]

Moser: Not true. [laughs]

Frankel: They're still limiting some of these high volatility stocks. The reason they gave, it makes sense to a degree, that their clearinghouse makes them keep a certain amount of capital just to cover the what ifs. There's a line from Ocean's Eleven that I remember that, "A casino has to hold in reserve enough money to cover every chip played on its floor." It's a similar type of situation here. Not calling Robinhood a casino, although a lot of people treat it like it's a casino.

Moser: Yeah, it feels like one right now.

Frankel: But it's a similar situation. They have to have enough money. Because when you make a trade, it takes a few days for that trade to settle, and there's money moving around. If someone moves in and out of a GameStop position 10 times in a day, that's a lot of money they are waiting days for it to settle. It really creates a capital problem of money being able to move around and cover potential losses in between times when shares are moving from one place to another.

Long story short, Robinhood said, "Whoa whoa whoa, this is getting out of hand. We need to bring in some new capital and limit the trading on some of these stocks." I know they raised $1 billion last week, I think read little over $2 billion today, or maybe it was over the weekend. But they raised a few billion dollars more of capital that allowed them to back off some of their trading restrictions. But they're not comfortable raising it beyond the levels that they're at right now, I guess at 4 shares at GameStop, they're up to 75 shares of AMC, it was 1 at one point, which AMC is not an expensive stock. [laughs] If I wanted to invest in that, and you told me I could buy 1 share for $14, why would I do that?

Moser: Yeah.

Frankel: Robinhood has millions of customers. They are a big platform right now. They are considered a smaller player because their average account balance skews lower with newer investors, few $100 in your account as opposed to like six-figure 401(k)s and IRAs and stuff like that. Robinhood is considered a smaller player, but they have millions of customers. These millions of customers are not happy that they're being told what they can and cannot buy at any given time.

That's really the issue. It's not that everyone on Robinhood wants to buy 100 shares of GameStop. I'm not generalizing Robinhood investors like that. But the point that would be important to make, and I think Mark Cuban said the same thing, that people should be able to make their own decisions. They need a platform that can accommodate that. That's why you're seeing a lot of blowback on that.

Moser: Yeah, I think you're right. I think that generally speaking, most people just want to be able to say, "Look, I want to be able to make that choice." [laughs] Whether it's going out after a snow storm -- shoot, man. You can go back and talk about all these lockdowns. That's part of the argument that a lot of people made, is, "Listen, I just want to have the choice to be able to make my own decision." I think that you're right there.

I'm glad that you brought up Robinhood's capital position or the capital requirements that exist for brokerages. The easy out here, the easy conversation is to say that they are just screwing the individual investor, period, end of story. That's what they're doing. Because they're afraid that they may be put between a rock and a hard place. Now, we don't work there, we don't know really what's going on. But we do know that those capital requirements exist. We do know that the SEC requires certain liquidity in capital thresholds for brokerages just to be able to continue operating like this.

We've talked about before too, with Robinhood's business model, this is a little bit of a different situation. There's a reason why they've been able to offer $0 trades, commission-free trades. It's because they're selling that flow off the bigger firms to then execute those trades. When you look at some of those bigger firms, you start to connect the dots, and you recognize that there could potentially be a conflict of interest. Then that's where that narrative then really gets out of Robinhood's control.

I feel like Robinhood was caught flat-footed here. I feel like this is a situation they probably never anticipated. I feel like they were clearly unprepared for it financially and otherwise. That has a lot to do with it. But by the same token, what is it, Ferris Bueller? "Life comes at you pretty fast." [laughs] This came in pretty fast and the Internet obviously changed everything, it ultimately makes things a level playing field. We're going to have to see our system adapt and evolve, because if you think this won't happen again, I would beg to differ.

Frankel: Well, I make two points first, and then I'd say something about what's causing all this. First of all, what you're saying is called payment for order flow. That's how Robinhood makes their money. They're not the only ones that do that. In fact, the only brokers I know that don't do that are Fidelity and Vanguard. I know TD Ameritrade makes a lot of money on its order flow. Pretty much everyone makes money on order flow. That's standard practice for routing your orders to one market-maker or another. They're also not the only ones who put restrictions on trading, but they were the most restrictive. TD Ameritrade, the one I use, they put restrictions on a lot of the higher-volatility stocks.

Moser: I use them as well. I went to the site and looked to see if they had any language in there, and it was very clear they said, "Listen, from time to time, we may have to do this. It's for everyone's protection." That's right. I look at this and I feel like I understand people's frustration with Robinhood, but yeah, this isn't necessarily a Robinhood-specific thing.

Frankel: No, their platform wants an excuse toward traders rather than investors. No. 2, their restrictions were the most restrictive, not to get repetitive with that statement. But really, what is doing this, you're seeing a lot of smaller investors trade at high frequencies in a very coordinated manner. The zero-commission trading really is what's enabling this. There's no friction in the system. If I want to buy and sell 10 shares of Amazon right now, 50 times, there's no reason I can't do that in rapid succession at very little risk or very little cost. There's no friction there. If a trade even costs $1, people would think twice before moving in and out of a stock so quickly. But the zero commission trading has really made it possible for smaller investors to really pool their resources together and create these short squeezes. Because back when it was standard practice to $9.99 trading conditions, that wouldn't have been a thing. They've eliminated the friction in the trading process, and that's what's really enabled this. This is the first time we are really seeing it play out in this coordinated manner. But like you said, now that we know it's possible, it will be silly to assume it's going to be the last.

Moser: Yeah. Well, [laughs] I've never bothered shorting personally. I can tell you, this is just one more reason why I don't really have any desire to mess with it.

Let's talk a little bit about the aftereffects here, because clearly a lot of Robinhood account holders are up in arms. They feel like they have been left hanging, and whether that's the case or not, there are other platforms out there that are picking up a little bit of that traffic that is leaving Robinhood's platform. I follow Kate Rooney, CNBC's Kate Rooney, on Twitter and I recommend you follow her if you're interested in fintech and stuff like that, she's @Kr00ney. She had a tweet up here that was showing the Square Cash App has been seeing a very large influx of those leaving the Robinhood platform and going elsewhere, someplace where they feel like maybe there's a little bit greater trust factor. Another name on there, and someone we've heard a lot from here recently is SoFi. SoFi picked up a lot of that excess traffic as well.

Frankel: Well, they have a trading app. A lot of people don't know that. [laughs] They are much better known for their lending, their student loans or personal loans and things like that. But a more recent part of their business, they have a trading app that's really geared toward millennials. It's really an ideal Robinhood competitor.

Now, there are some things that Robinhood does that SoFi invest -- it's called SoFi Active Investing. I think it's the official name. There are some things Robinhood does that SoFi can't do, like options trading, for example, right now. It's not set up to do that, but it will let you buy fractional shares. It's very millennial focused, it's very community focused, where you can follow other investors' moves and things like that, the things that appeal to the trader crowd. It's being taken public by a SPAC, IPOE, one of Chamath's SPACs, and Chamath has a huge amount of influence over investors right now. There are a lot of investors waiting to see what his next move is.

Moser: I have noticed that. [laughs]

Frankel: The fact that this is the only trading app or trading platform that has a direct connection to Chamath is a big deal. The stock IPOE, we've known they're taking SoFi public for a few weeks. We've talked about it a few times on the show. The stock's up 32% since Thursday on no real news other than the fact that Robinhood traders are upset [laughs] and a lot of them are conceivably looking for another place to go.

It's really significant that Robinhood put restrictions on today, because it shows that wasn't just a one-time thing, that they are having to be careful right now until this whole thing dies down. Which a lot of Robinhood investors could have lived with it if it was like, "Okay. You can't trade GameStop on Friday afternoon and extends to the next week." The likelihood of people trying to switch is getting higher.

Moser: Yeah, that's right. Before we move on from this, because I'm certain [laughs] we could probably talk about it next week as well so we won't beat a dead horse here. I'd be curious to know just from your perspective, I think toward the end of last week, really the conversation was less a question and more a statement that Robinhood will never make it past this. I tend to look at situations like this and take a little bit more of a, I don't know, a little bit more of a moderate approach. I think that they can certainly make it through, and it does seem like they have raised some more money here recently as well to help deal with this.

I mean, I've never been a Robinhood account holder and never will, simply because I don't need it. But there are still plenty of folks who use that platform and it feels like they are giving this its due attention. It feels to me at least like part of this is them looking out for their account holders to an extent. Do you think Robinhood is able to come out on the other side of this and keep growing their business?

Frankel: I think it depends how many customers they actually lose. Robinhood, they want their investors, but they really don't want to lose their traders. Like you said, they make payment for order flow. So somebody who's moving in and out of stocks constantly is their bread and butter. But on the other side of it, switching your broker is just tough. Like we've talked about, why don't more people leave Wells Fargo? Because it's a pain to switch your bank, a similar thing exists here. It'll be interesting to see how that plays out. They're not a public company, so we don't get too much insight on what's happening behind the scenes. But I'd have to say that if Robinhood were to go public today, it's not going to get the same valuation it would two weeks ago.

Moser: No, no, and maybe this is a situation where they would rather just be a part of something bigger. I mean, maybe there's an acquisition on the horizon there. I don't know. But clearly, this has ruffled a lot of feathers and remains to be seen exactly how this plays out. But it seems to me to show that while we have a great system here with our market, it is not a perfect system. There are things that need to evolve with technology, because what we always talk about is the power of network effects as investors, and we look for those investments with network effects. This really shows the power of network effects for investors as a collective. The network and the power of the community is what really facilitated this, and that isn't going to go away. So it feels to me like the powers that be are going to need to give this a very hard look and evolve our system to where something of this magnitude can't happen again. Either way, it makes my interest in shorting stocks even less, if that's possible.

Frankel: Yeah, I'd agree with that.

Moser: Matt, let's pivot over to something a little bit more productive and inspiring, a little bit more optimistic maybe, if you will. We've got a couple of upcoming IPOs here. It sounds like they are in the works here, and we can expect them soon. First off, I want to talk about Latch Software, a company that I believe helps ensure the connected building, right?

Frankel: Yeah. They're a really interesting play. They're either going public by SPAC merger. They are emerging with Tishman Speyer. It's a pretty big real estate company that has a hand in Yankee Stadium, a lot of New York properties that are really big. That's the most famous one I saw on their website. But they've had a hand in a lot of New York properties. They launched a SPAC, they raised $300 million, and just announced that they are going to be taking Latch public. Latch is a smart-home technology company, is the best way I would describe it. They're known for their smart locks. When I went to CES a while ago, I think I saw a Latch smart lock that I got a demo of. That's where the name Latch comes from, the lock.

But their big product is their full-building operating system. Their mission is to bring rental housing into the 21st century. People can open their apartments with their smartphones, they can control deliveries and visitors and things like that. There's all kinds of connectivity options that you could integrate into there. Their products, you don't buy them as a homeowner. They're installed in the entire building. The building pays for a multiyear subscription to their Latch operating system, and the landlords get to benefit from it.

It's a really interesting play. I know Chamath is mostly known for his own SPACs, the IPOs, IPOE, IPOD, all those. But he actually led the private investment round for this company, the PIPE as they call it, the private investment public equity. That wasn't as well publicized, but he is heavily involved in this, and he actually tweeted, "This is the best software-as-a-service company he's ever seen," which that's a bold statement.

Moser: Yeah, it is.

Frankel: It's a very early-stage company. They are losing money faster than they're getting revenue at this point. It's worth mentioning, they are at a very early stage. That's why the valuation is low. Latch is getting over $500 million as part of this deal, and even after that, they are only valued at $1.5 billion. It's not a hefty valuation. That capital should give them a lot of ammunition to grow and fuel their losses as we go on. But it's interesting statistics. They had a 154% revenue retention. That's pretty good for a software-as-a-service company. That might be a lot more than some we are talking about.

Moser: Typically you see the 120%, 125%, 130%, and you think, "Wow, that's strong."

Frankel: So 154% is pretty impressive.

Moser: Not bad.

Frankel: One in 10 new multifamily buildings in the U.S. built in 2019 were built with Latch with their operating system installed. There are 47 million rental units in the United States and another 93 million in Europe. That's a pretty big addressable market. This is one I'm keeping on my radar. The SPAC is public, it's called TS Innovation Acquisitions is the company taking it public. Ticker symbol is TSIA. You can trade this now. Technically, the IPO will happen when the merger deal completes. But just like SoFi, you can trade it now. It's trading at a pretty decent premium, but not like some of the other Chamath's deals. It's one that I'm keeping on my radar. I'm not ready to pull the trigger yet. As we've talked about before, it takes quite a bit for me to get really interested in an IPO, but this is definitely an intriguing one.

Moser: Yeah, it definitely sounds like. I mean, that's definitely a big market. We've seen Google [Alphabet] making a big investment in ADT, for example. Another company that I've recommended, Alarm.com, plays in the similar sandbox. Plenty of opportunity there, particularly as 5G buildout rolls out and our infrastructure and connectivity continues to proliferate. Going to be a lot of different ways, a lot of different opportunities in the coming years, and it sounds like Latch could be playing right into that.

What about LoanDepot? This is another interesting IPO coming up and we talked a little bit about some lenders here recently. LoanDepot, another mortgage lender going to be IPO-ing here. This looks like a business with some real traction.

Frankel: Well, you said it. It's another mortgage lender. We've seen quite a few of them come public lately. There was Rocket Mortgage, United Wholesale Mortgage is another one that just recently went public, and Homepoint, which we talked about on last week's show, just went public. It's worth mentioning that Homepoint went public at $13 a share. You know what it's trading at now?

Moser: I don't.

Frankel: $11.50. It has not had the 2020 IPO reaction we're used to seeing lately. The market didn't receive it very well. [laughs]

Moser: What's up, man?

Frankel: It didn't triple on its first day. That's a fail.

Moser: Pass.

Frankel: LoanDepot is going public. TD Ameritrade has it listed on their calendar for Thursday. It's coming up pretty soon. They're going public the traditional route, not through a SPAC, not through a direct listing, which feels so 2019 at this point.

Moser: I was going to say, man, I don't even understand what that means anymore.

Frankel: Are you even using a SPAC? Come on. [laughs]

Moser: Do you even SPAC, bro? [laughs]

Frankel: LoanDepot, you're right, they do have a lot of traction to go. They first tried to go public in 2015, but they pulled the plug because of bad market conditions, which a lot of companies did at that point. They've grown their market share, they're the fifth-largest retail mortgage lender. Retail meaning consumer-initiated, like a mortgage lender that you would just go to apply to.

Moser: Like a retail bank.

Frankel: Right. Not like sold through a homebuilder or sold through a broker or things like that; direct to consumer. They're the fifth-largest retail lender in the U.S. They're out there, they're a big company. They've grown their market share from 1% in 2014 to 2.6% now. Their lending volume has more than doubled over the past year, but you have to take that with a grain of salt. We talked about it last week when we talked about Homepoint, everybody's been refinancing. You can't judge a mortgage lender based on how much volume they did in 2020, because everybody was refinancing their homes. [laughs] Anyone who didn't refinance their home in 2020, I don't know what they were doing. You can't really judge it by the volume growth. Judge it by the market share, which is why I quoted that statistic first. They went from 1% to 2.6%, so they almost tripled their market share. That's pretty impressive.

But like I said, there's a reason all of these mortgage companies -- I mentioned Rocket, United Wholesale, Homepoint -- they're all going public right now. It's because they're on the tail end of this giant mortgage boom of the refinancing, so that people are buying homes in record numbers and home prices are going through the roofs, so the actual mortgage principal amounts were getting larger, because there was so little supply in 2020. 2020 was not a normal year for the housing market, and it made a lot of mortgage lenders look very, very good. I mentioned Homepoint is trading for below its IPO price, and I think it's because the market's figured this out. [laughs] The 2020 numbers are making these companies look a little bit better than reality.

Moser: A little bit of pull forward.

Frankel: I don't want to take anything away from LoanDepot. Their growth has certainly been impressive. Like I mentioned, from 2014 to now, they've grown their market share that much. That's over a longer period of time than just the 2020 great environment. I'm more hesitant to take a step back and pump the brakes on all these mortgage lenders before I would get interested in those. I want to see how 2021 plays out and I want to see how they do when everyone's already refinanced and that part of the market is coming down, because there's only so many people who can benefit from refinancing.

Moser: I know, you're right. I remember we talked about that so much several years back with Ellie Mae, the mortgage software provider, that we recognized the amount of volume that they did in refinancing a loan. Purchase was a big part of it. In times when refis start to shrink up a little bit, purchase does jump in there and take a little bit of that share. But it really is trying to figure out exactly how much. Yet to your point, refi volume has just been so on fire here over the past couple of years. You're right, it's not normal, it's going to slow down and how it impacts these businesses. I certainly understand them wanting to get in now, where they can present really the best-case scenario with those numbers.

Frankel: It makes sense why they're doing this wave of IPOs. But there's also a reason you're not seeing the giant first-day IPO pops like you were with Airbnb and DoorDash or any of those.

Moser: Yeah, that makes a lot of sense.

Frankel: You might actually be able to get in close to the IPO price.

Moser: [laughs] Go figure. Well, we'll see. We'll definitely keep an eye on it, and it's certainly another one for us to cover here on the show.

Matt, we have a listener question from last week on Twitter, @Willy1Mo asked, "TMFMathGuy, I was listening to Industry Focus on the 25th. How does the direct listing of Coinbase affect existing clients from buying shares? I appreciate you." I think that's what he means, right?

Frankel: Yeah. Coinbase announced that it's going to do a direct listing instead of a traditional IPO. Like I just said, traditional IPOs are so 2019 at this point. [laughs] They're going to directly list, which is a very cost-effective way to go public for companies that don't need to raise capital, which Coinbase really doesn't. They're a very well-capitalized business. We haven't seen all the details, but trust me, they have enough money. They're going to just list existing shares.

An IPO allows a company to sell new shares. On IPO, a company might sell 10 million new shares, and when they sell them, they raise capital to grow the business. Coinbase already has a nice secondary market for its shares, which I'll talk about in a second. But they're just going to directly list all the shares ahead up. Palantir recently did this. That's how Slack went public; that's how Spotify went public. It's not unheard of. The shares will just start to list. The whisper is that they're targeting a $200 share price, which translates to a $50 billion valuation for Coinbase.

Moser: Wow.

Frankel: That was my reaction.

Moser: Sounds a lot.

Frankel: I mentioned last time that they were going to start selling shares to their customer base before the IPO. They're doing it through Nasdaq Private Market, which is not an uncommon way to sell shares pre-IPO. The company is not selling shares. They're letting employees and insiders sell shares to Coinbase users before the IPO.

If you're a Coinbase user, you should have gotten an email from the Nasdaq Private Market facilitating this. The actual direct listing is expected in late February to early March. There are rumors that they could get up to about $75 billion in valuation.

We've talked about three upcoming IPOs, and I think Coinbase is the one that I'm least likely to invest in. What about you, Jason?

Moser: I think I'm probably with you. It's the one that I would understand the least. I would say just by virtue of the one that I just understand the least. I understand the hype behind crypto, and I understand what Coinbase does as an exchange. It's the one that I don't have the fullest grasp on.

Frankel: Even at the low end, say $50 billion valuation, I just don't see the upside.

Moser: Yeah, that's a lot.

Frankel: For Latch with $500 million in cash and a $1.5 billion valuation, I can see them using that to grow to a much bigger company than $1.5 billion. I could see the upside in a lot of these other names. I don't see Coinbase being a $1 trillion company. Maybe I'm just short-sighted, but I just don't see it.

Moser: Well, I'm tending to agree with you there, but I guess we shall see.

Frankel: Now, let the mean Twitter comments begin. @TMFMathGuy. [laughs]

Moser: Well, let's hope not. Come on, it will be nuts. [laughs] Matt, before we wrap it up, as always we like to give our listeners a couple of stocks to watch for the coming week. What is your one to watch this week?

Frankel: I'm watching an apartment real estate company called AvalonBay Communities that reports earnings later this week.

Moser: AvalonBay, sounds like a soap opera.

Frankel: They're actually based right in your neck of the woods.

Moser: Oh, really?

Frankel: I want to say they're in the Alexandria area. [laughs] They're somewhere in the DC area, I know that. They primarily own and operate apartment complexes in expensive areas. Think New York City, think Southern California. DC is a big market of theirs. Boston.

There's a lot of fear that those types of places are going to have a mass exodus in this new age of remote work. When someone can work from wherever they want, why are they going to rent a Manhattan apartment, for example, is the big fear. We've seen their numbers trickle down a little bit, their vacancies have been a little elevated, their rent collection has been a little low. Not alarmingly so, but I'm really curious to see how that goes, because they have not really done very well for their investors lately.

Their stock is still way down, I want to say about 30% lower than its prepandemic level. It's one of the worst performers in the space. A lot of people just are really not sold on the fact that anyone is going to want to live in those kinds of cities anymore. [laughs] I don't buy it, to put it mildly. But I'm curious to see in their fourth, now that we're a few quarters in. Fourth quarter, remember, a lot of the stimulus measures had expired or were on their way out. Unemployment benefits weren't as strong as they were in the second and third quarters. I want to see how those kinds of things are affecting the numbers in AvalonBay.

Moser: What's the ticker for AvalonBay?

Frankel: A-V-B.

Moser: A-V-B, all right. Well, I am going to be watching one of my four War on Cash components. PayPal earnings drop on Wednesday after the market closes. I anticipate it to be a good quarter. I figured the total payments volume will likely be exceeding that $1 trillion run rate now. I'll be interested to see how the account holders guidance shapes up for this coming year, given what we saw last year, they essentially guided at the beginning of the year for I think $35 million and then recently basically doubled that guidance.

Obviously, at the time, we weren't going through what we are going through now, but as we move away from cash and move more toward mobile and digital payments, a lot of people are signing up for PayPal services, and Venmo is one of those services. Venmo last quarter had 65 million users, and they did note that Venmo in 2021 will contribute positively to transaction margin dollars. Profitable Venmo? Hey, yes, please.

It's possible you could see a situation where PayPal is a little bit of a victim of its own success and they're going to come up against some tough comps from 2020. But nevertheless, I will be very interested to see how that all develops. We'll be looking for that on Wednesday. The ticker for PayPal, of course, is P-Y-P-L.

Matt, I think that's going to do it for us this week. As always, man, I appreciate you taking the time to jump on and share your knowledge.

Frankel: Of course. I always like joining you on a nice rainy day.

Moser: Yeah, we'll keep on doing it as long as they let us.

Remember, folks, you can always reach out to us on Twitter @MFindustryfocus, or you can drop us an email at [email protected]. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

Thanks as always to Tim Sparks for putting this show together for us. For Matt Frankel, I'm Jason Moser. Thanks for listening, and we'll see you next week.