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Robinhood, the commission-free meme-stock dream shop, is going public. There’s talk of a bubbly $40 billion valuation. Woohoo! Plus, the company has announced that up to 35% of the new shares in the initial public offering are reserved for its own retail customers. Groundbreaking? I don’t know. If Robinhood really is the future of Wall Street, why not take itself public and sell 100% of the new shares to retail customers? Who needs Goldman Sachs and JP Morgan ?

Back in my days as a Wall Street analyst, one of my favorite things to do was IPOs. I’d go on roadshows with management teams. My job was to provide earnings estimates since companies aren’t allowed to give forecasts, but really it was a branding exercise. I’d have my name associated with them, and maybe become “the ax in the stock”—the first person investors would call for insight.

But before that, you had to win the deal. Prospective banking teams would show up to do an IPO pitch, nicknamed the bake off, with thick pitchbooks some lowly bankers would pull all-nighters putting together. My job was to position the company to investors. Since there were tons of pitches and I was generally lazy, I used the same three bullet points every time: 1) The company sells into a monster market, 2) has an unfair competitive advantage, and 3) a business model to leverage that advantage. It worked almost every time. Sadly, that unfair stuff is now grounds for an antitrust investigation.

During the dot-com boom I ran a fund and my experience with IPOs meant I got calls most days from startup CEOs saying, “I hear you’re helpful picking bankers.” So I’d walk through pros and cons of bankers: reputation, research, retail vs. institutional, pricing, first-day stock pops (usually 10% to 20%, though sometimes it would double or even quintuple).

Remember, after an IPO, only 10% to 20% of total shares trade at first, until insider shares are unlocked some 180 days later, though sometimes earlier. Until then it’s not a real market—there is often more demand for shares than supply and IPO stock prices inflate. Perversely, that’s when most Robinhood customers will buy Robinhood shares and likely overpay. Steal from the (wannabe) rich, indeed.

After Eliot “Steamroller” Spitzer alleged abuses by Merrill Lynch ( Henry Blodget’s “POS” emails) and others, IPOs changed as a Wall Street settlement put up a Chinese wall between banking and research, even cutting off phone calls. Analysts often went outside and used pay phones to call bankers. IPOs didn’t die, but now we have more mergers, SPACs and direct listings. I’m not sure that’s for the better.

Later, as an investor in companies, I sometimes was invited to sit in on the banker IPO pitches. Now that was fun. In advance, I’d preview management on the pitches bankers would give, the spin they’ll fling, the goal of finding long-term investors (I know, how quaint), the meaninglessness of the first day pop (except to get on CNBC), and then how they really should be positioned, monster/unfair/etc. Often three to four meetings a day, I’d get funny looks from former colleagues and competitors and the inevitable “What’s he doing here?”

So what about Robinhood? It certainly sells into a monster market, with 18 million funded accounts—although note there were huge spikes in app downloads after January’s GameStop and meme-stock explosions and during the joke cryptocurrency Dogecoin gyrations this spring. Now that’s marketing!

Does Robinhood have an unfair advantage? I’m still looking. Robinhood probably should have bought reddit, home to r/wallstreetbets, which whips up the frenzy of trading in those meme stocks. The two go together like peanut butter and jelly. Payment for order flow from Citadel and others, 81% of Robinhood revenues in the first quarter, has been replicated by now by most online trading firms. Robinhood should probably have bought its own high-frequency trading firm and paid itself for order flow, the bread for that PB&J. Now that would be an unfair advantage. Better yet, Citadel should own Robinhood, though it’s probably too late.

As far as a business model, if you dig deep into the numbers, you’ll see Robinhood is really just an options trading racket. As burnt Wall Street investors know, hardly anyone makes money in options except the folks who sell them to you. According to Bloomberg’s Matt Levine, Robinhood squeezes 9.5% out of option accounts for itself vs. 1.2% for crypto and 0.2% for stocks. Even worse, options on meme stocks are volatility on volatility, hard to envision as recurring revenue. Plus, 6% of revenues came from Dogecoin trading, not sustainable unless Elon Musk joins the cast of “Saturday Night Live.” Obviously Robinhood is a bull-market stock, but that doesn’t make it smart—as the wise Wall Street adage warns, “don’t mistake a bull market for brains.”

Journal Editorial Report: The week's best and worst from Kim Strassel, Kyle Peterson, Jillian Melchior and Dan Henninger. Image: NY Post/Zuma Press/AFP via Getty Images Composite: Mark Kelly The Wall Street Journal Interactive Edition