Stash Founders: Ed Robinson (L), and Brandon Krieg
Stock-trading app Stash plans to announce a $125 million venture investment to help fuel customer growth. But it’s not looking to attract the type of trader who might bet on GameStop.
The New York-based company will announce a Series G funding round Wednesday, led by Eldridge with participation from T. Rowe Price and others. The cash injection puts Stash’s valuation at $1.4 billion, according to people familiar with the matter.
“We purposely built a bad day-trading system,” Stash founder and CEO Brandon Krieg told CNBC. “Our brand and our message, as well as our onboarding are not attractive to someone who’s coming to day trade.”
Krieg said while individual stock trading was allowed on Stash, it does not allow trading on margin or options trades. The app doesn’t provide real-time market data, either.
The announcement follows a hectic week for Stash, and most trading apps and brokerage firms. Robinhood and Interactive Brokers restricted trading of certain volatile stocks such as GameStop and AMC as they went viral on social media.
Stash said it temporarily halted trading of AMC and GameStop after its clearing firm, Apex, briefly stopped accepting buy orders. Those limits have been lifted at Stash, and still vary at other brokerage firms.
The stock market ushered in a flood of new investors last year. The industry added a record 10 million accounts, 6 million of which came from Robinhood alone, according to JMP Securities. Stash said it doubled its customer based to a total 5 million accounts last year, and grew assets under management to $2.5 billion.
Stash makes money on a subscription fee charged to its clients. The CEO said the start-up “makes insignificant” revenue off of selling customer trades to high-frequency trading firms. Robinhood and others brokerage firms rely on that behind-the-scenes revenue stream in order to offer free trading.
Stash’s interface includes more “hand-holding” for new investor than some of its competitors, Krieg said. He likened it to a private bank for individual traders, and said he took cues from the some weight-loss industry.
“If you want to lose 30 pounds, you can’t lose it in a day — that’s the way it works in financial services,” Krieg said. “We have a simple investing philosophy: buy and hold for the long-term, and diversify.”