Our readers at Best Investing Apps expect us to know what's up with well... investing apps.
That's why I had to contact Robinhood customer support after finding out about a new Robinhood referral program that is up and active. I had been under the impression that referrals get $10 each ($10 for you, $10 for me). Turns out that all changed on March 8th, 2017.
What Do You Get For Robinhood Referral?
If you use our referral link, you'll get to participate in what I am calling the Stock Lottery. Basically, Robinhood will give you one share of stock, chosen at random, for signing up using our referral. This stock can be worth up to $150!
Once you're signed up, you can refer friends too. This will net you and your buddy a free share of stock when they sign up. Your share of the random stock goes directly into your active Robinhood account.
Can I Still Get Cash for Referrals?
Nope. As of March 8th, 2017 all Robinhood referrals are rewarded with the stock lottery system.
This was confirmed when I contacted Robinhood support today (5/2/17) to inquire. Here's the response I got back. Click the image for full resolution.
NOTE: Their site announcement from March 8th states that, "This promotion is only available to a select group of users. We’re hoping to make this available to everyone as soon as we can. " However, my direct correspondence (above) from May 2nd states that this referral reward is now the universal referral reward for all Robinhood users.
Because the stock chosen for you and the person who referred you is random, it can be worth a lot more than the old $10 referral bonus, though. Here's how Robinhood determines which random free stock share you get:
Which Stock Will I Get?
When your friend’s application is approved, the shares of free stock are chosen randomly from our inventory of settled shares. Because we choose randomly, you and your friend may not receive the same stock. The value of the share may be anywhere between $3 and $150, and fluctuates based on market movements. We choose companies and purchase stocks every day into the inventory based on their total value (market capitalization) and the price of each share.
Now, I know their old referral system cost them $20 per person referred. So, if I were them, I would act like a casino and set the statistical odds at right about $20 worth of stock on average.
What I'm saying is, the average value of the stock given out by Robinhood for their new referral system is likely to me a cumulative $20 per referral or maybe less. Who know, they don't let us see behind the curtain so they could easily have rigged the odds more in their own favor.
What Should I Do With Referral Stock?
Well, this is a bit of conundrum, isn't it? According to Robinhood, you're required to hold the stock for 2 days before selling the referral share. So, it's really just dumb luck.
You could be gifted a great and valuable share of a $100 stock. Because you're required to hold the stock for two days, however, it could plummet to, say $80 by the time you're allowed to sell it.
A free share of stock is still a free share, so ultimately it doesn't matter too much what the performance ends up being.
I can't tell you what to do with your own investments but I personally sell each share of stock that I receive from the referral program (thanks, everyone!) unless it's an additional share of a stock I already hold.
I don't have the time to assess each random stock that Robinhood throws out, so instead, I simply sell my shares after two days at any price and reinvest in shares of stock I have already fully evaluated and deemed an appropriate investment.
When Can I Withdraw Cash From Referrals?
According to the Robinhood site at this time you must hold any proceeds from sales of referral rewarded stocks in your account for at least 30 days after the sale. This means there's a 32-day window from referral to the withdrawal of proceeds if you simply want to remove the cash from Robinhood.
You're free to sell the stock after 2 days and reinvest the money, however. Here are the details.
How This Impacts Your Investing
Frankly, it really doesn't. In my mind, it's a fun little random chance lotto and the hope to win a share of a stock worth "up to $150" is probably drawing in more referrals than their old $10 system.
More than anything, really, it adds a "thrill factor" to the referral program and I suspect that's resulting in higher conversions for them.
If this article has been helpful, please consider using our referral link. You'll get a random free share of stock, and our share will be sold to help keep this site running.