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Exclusive: Public acquires Stocktwits trading accounts

Apr 16, 2024
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Illustration: Tiffany Herring/Axios

Stock-trading company Public agreed to acquire over 15,000 brokerage accounts from Stocktwits, the two companies told Axios exclusively on Tuesday.

Why it matters: It marks Stocktwits' exit from the stock-brokerage business, just two years after it joined the fray.

Behind the scenes: The transaction (expected to close in about 30 days) is valued at under $10 million, according to a source familiar with the matter.

Zoom in: For Public, which currently has 3 million users, the deal is about customer acquisition.

  • Public catered to long-term holders at inception, but it has increasingly launched features — like options trading — that attract more active traders.
  • "The crux of it is, we want investors who are highly engaged," Public COO Stephen Sikes says, noting Stocktwits users generally trade more often.

Between the lines: Stocktwits was profitable on a net income basis before it launched stock trading in July 2022, says CEO Howard Lindzon, who returned to the role this year.

  • Exiting the business will make it profitable again, he tells Axios.
  • Founded as a social site for traders, Stocktwits became a trading platform under former CEO Rishi Khanna — just as retail activity began to slow.
  • The company struggled with the idea of increasing marketing spending to shift its 1 million-plus monthly active users from their existing brokerages to Stocktwits.
  • The company laid off 37 employees this year due to the retreat.

What they're saying: "The amount of volume you have to do to make trading a profitable business is just way higher than anticipated," says Lindzon.

  • "When I came back this year, the last thing I wanted to be in was the brokerage business. We wanted to focus on profitability."

The big picture: Stocktwits' exit underlines the intense competition in an industry that includes Robinhood and Charles Schwab.

  • Stock brokerage startups raised capital easily during the pandemic and were among of its biggest beneficiaries.
  • Now that the funding tap has turned to AI and account openings have slowed in recent quarters, companies are diversifying their revenue streams (Robinhood and Public are increasingly earning from interest on deposits), while others seek consolidation.

What's next: Stocktwits is refocusing on its social media business and plans to capitalize on its data in the AI boom.

  • Pointing to the $60 million deal Reddit cut with Google to make its data available for training AI models, Lindzon says the company is building up a data business as well.
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