Will Investors Bet on Robinhood? & Duolingo’s Learning Patience

Summary

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Brew Markets – Episode Summary

Episode Title: Will Investors Bet on Robinhood? & Duolingo’s Learning Patience
Date: November 6, 2025
Host: Ann Berry
Co-host: John Pateau

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Overview

In this episode, Ann Berry and John Pateau dive into notable earnings reports and market trends, unpacking investor sentiment around Robinhood, Duolingo, and Planet Fitness, the potential ripple effects of a Warner Brothers sale, and the psychology behind stock splits. They blend sharp financial insight with a conversational tone, highlighting how headline performances can mask deeper investor worries.

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Key Discussion Points & Insights

1. Robinhood’s Paradox: Blockbuster Growth, Sinking Shares

[00:03–03:42]

• Earnings Recap: Robinhood posted Q3 earnings that beat both revenue and profit expectations, with notable crypto-driven revenue growth (up 300% YoY to $268 million, but still 7% below forecast).
• Stock Movement: Despite the strong numbers, shares dipped by nearly 10% during trading.
• Revenue Mix Concerns: While topline figures look strong, the composition worries investors—crypto peaked but missed projections, while prediction markets became a $100 million revenue stream via third-party partnerships.
• Regulatory Risks: Prediction markets, recently allowed in the U.S., carry perceived insider trading dangers.
• Cost and Margin: Expenses are expected to be higher due to expansion, but adjusted EBITDA hit $740 million with ~60% margins—a healthy figure.
• Valuation Skepticism: With Robinhood up 250% YTD and valued at a $130 billion enterprise (~70x profits), even bulls are cautious.

  “Long-term bulls, but look for a better entry point. Better entry point is a jargonized way of saying look out for a price cut.” – Ann Berry [02:53]

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2. Duolingo: Great User Growth, Shaken Confidence

[03:42–08:52]

• Strong Metrics: Revenue up 40% YoY (to $272 million); daily active users +35% YoY (51 million); paid subscribers also up sharply; EBITDA at $47 million.
• Shares Tanked: Despite wins, shares fell by 28% post-earnings.
• Strategic Pivot: CEO Luis von Ahn announced a focus on retaining users over immediate payment or ad monetization, betting that long-term AI development across multiple subjects will pay off.

  “We’re doing this now because we want to keep growing users for a long time and because of our increasing conviction that AI can fundamentally change what’s possible in how we teach.” – (quoted by John Pateau, [04:36])

• Skepticism on Broader Thesis: Ann questions the practicality of competing, even with AI, for users’ limited educational attention against giants like YouTube, and perceives the new strategy as an admission that early monetization is driving users away.

  “To me [it] sounded like code for trying to monetize people too early is not working. We are seeing attrition and we need to stop the bleeding.” – Ann Berry [05:41]

• AI Backlash & Marketing: After past backlash against “AI-first” branding (and fears of cutting human employees), Duolingo plans to restart its quirky “unhinged owl” ads. Analysts, however, question whether the cultural moment has moved on.

  “They pulled [the ads] for the last quarter, but they’re going back to unhinged ads because it really drove a lot of people to the app.” – John Pateau [08:35]

Market Context: Other EdTechs like Chegg (-42% YTD) and Udemy (-37% YTD) are struggling similarly.
> “Duolingo shares down 40% each year to date. 40% seems to be the number for all of these popping on down.” – Ann Berry [07:45]

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3. Planet Fitness: Winning with Scale, Not Just Gyms

[08:52–13:38]

• Strong Quarter: Revenue beat ($330 million+), adjusted EBITDA up to $141 million, 35 new clubs opened for a network of 2,795 locations and 20 million members.
• Unique Competition: Their biggest competitor isn’t another gym, but “a fear of walking in the front door.”

  “I think our biggest competitor is a fear of walking in the front door.” – Planet Fitness Leadership, quoted by John Pateau [10:28]

• Inclusive Model: The “Judgment Free Zone” attracts diverse members. Their free High School Summer Pass brought 3.5 million teens—though current members have mixed feelings.

  “Planet Fitness basically opened up a daycare center.” – John Pateau (relating his friend’s complaints) [11:05]

• Member Anecdotes: Ann shares a story about how the gym’s emptiness appeals to some (“I can go and nobody will see me. And half the stuff doesn’t work... but I get my workout done.” – Ann Berry’s friend [12:32])
• Recurring Revenue: Many pay but rarely visit—good for the bottom line.
• Resilience vs. Peloton: Planet Fitness is thriving (+23% Y/Y), while Peloton faces another massive recall and struggles with growth into commercial spaces.

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4. Movie Theaters & The Warner Brothers Sale Uncertainty

[14:08–16:18]

• Earnings for AMC & Cinemark: Both chains point to film release timing—“a weak first quarter... blazing hot second quarter... softened third quarter”—as the dominant factor for their fortunes.

  “The theaters can’t control the flow of movies.” – John Pateau [14:22]

• Warner Brothers Up for Sale: With bids from Paramount, Comcast, Amazon, and Netflix, there are concerns that consolidation will mean fewer theatrical releases and revenue pain for theaters.

  “If Netflix purchases Warner Brothers… the concern is that Netflix gets the library… puts it on [their] streaming service… we may be seeing fewer movies from Warner Brothers and that could be a big hit to these movie theaters.” – John Pateau [15:44]

• Mixed Market Reaction: AMC +3%, Cinemark -1%, Warner Brothers Discovery -1%.
• Broader Media Volatility: Ann highlights the digital-vs-experiential tension and promises ongoing coverage.

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5. Stock Splits: Investor Psychology Explained

[17:53–23:08]

• Listener Question: Tyler in Columbus asks why Netflix and ServiceNow are splitting their stock.

• Mechanics: A stock split increases share count and reduces price per share, without changing total value.

• Netflix Example: 10-for-1 split reduces roughly $1000/share to ~$109/share after Nov 14.

• Why Do It?

  • Accessibility: Historically, to let smaller investors participate—though now, anyone can buy fractional shares.
  • Behavioral Finance:
    • “Anchoring bias”—investors perceive post-split shares as “cheaper.”
    • “Availability bias”—splits attract attention and buying.
    • “Gambling preferences”—owning many shares feels more enticing.
    • “Success signal”—stock splits correlate with strong performance.

• Practical Reason: For employee stock option programs, a lower price per share can make exercising options easier, since fractional options often aren’t available.

  “A stock split doesn’t make a company fundamentally more valuable. It just slices the same pie into more pieces.” – Ann Berry [20:48] “Nonetheless, stock splits often do result in short-term abnormal returns, with companies seeing an average 2–4% increase in total value around the split announcement. This is a phenomenon that researchers call the announcement premium.” – Ann Berry [21:48]

• No Action Needed: Stock split shares are automatically credited to brokerage accounts.

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6. Market Close Snapshot & Headlines

[23:23–24:00]

• Markets Down: S&P 500 -1.1%, Dow -0.8%, Nasdaq -2%.
• Breaking News: Ford is reportedly considering cancelling the electric F-150 due to weak demand—potentially the first major U.S. EV casualty.

  “If the electric 150 goes away, the money losing truck would be America’s first major EV casualty.” – John Pateau [23:50]

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7. Notable Quotes & Memorable Moments

• On Robinhood’s stock drop:

  “Long-term bulls, but look for a better entry point.” – Ann Berry (citing Morgan Stanley, [02:53])

• On Duolingo’s pivot:

  “Trying to monetize people too early is not working. We are seeing attrition and we need to stop the bleeding.” – Ann Berry [05:41]

• On Planet Fitness:

  “I think our biggest competitor is a fear of walking in the front door.” – Planet Fitness Leadership, via John [10:28]

• On Movie Theaters’ existential risk:

  “The theaters can’t control the flow of movies.” – John Pateau [14:22]

• On stock splits:

  “A stock split doesn’t make a company fundamentally more valuable. It just slices the same pie into more pieces.” – Ann Berry [20:48]

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Timestamps for Major Segments

• Robinhood Earnings & Market Reaction: [00:03–03:42]
• Duolingo Earnings & EdTech Trends: [03:42–08:52]
• Planet Fitness & Gym Industry: [08:52–13:38]
• AMC, Cinemark & Warner Brothers Sale: [14:08–16:18]
• Stock Splits Explained (Netflix, ServiceNow): [17:53–23:08]
• Market Close, Ford EV News: [23:23–24:00]
• Upcoming: Tesla Pay Vote Tease: [24:00–24:36]

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Tone & Style

Ann and John keep the conversation breezy yet substantive—mixing sharp financial analysis with personal anecdotes, skepticism, and a little humor (“bringing crazy back” with Duolingo’s marketing, [08:52]). Ann is particularly candid in challenging management narratives and flagging where investor optimism might hide risk.

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For New Listeners

This episode offers a compelling snapshot of how market sentiment can diverge from company narratives and topline results. The discussion threads through several sectors (fintech, EdTech, fitness, media, and behavioral finance), always rooting big moves in psychological drivers and practical implications for investors.

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End of Summary

Transcript

[Ann Berry]

Duolingo fails to speak investors language. Planet Fitness gets its shares in shape and could a Warner Brothers sale make movie theaters flop? Our take on earnings Plus Netflix is doing it and service now is too. We explore the psychology that's driving stock splits and Robinhood post blockbuster revenue growth. So why is the stock price down? For Thursday, November 6th, it's Brew Markets Daily and I'm Ann Berry Foreign More market details to come. But first, Robinhood, the latest in a line of tech fueled darlings that beat earnings and revenue expectations in its third quarter report but saw its stock drop nonetheless. Robinhood shares were down almost 10% at various points during the course of today's trading session. Well, the headlines for the company were strong in last night's report with revenue down doubling year over year. But the composition of revenue is drawing questions. Crypto driven revenue was up 300% hitting $268 million but still about 7% short of expectations. Trading activity overall was slightly lower than the market had hoped for and the revenue gap was closed, which is good news, but by new business lines that aren't entirely without controversy. Prediction markets is now $100 million revenue unit for Robinhood. And while it's getting a lot of buzz, the company, at least for now, does not plan to launch its own version of the product, instead partnering with third party providers like Kalshi and Forkastx, which may actually be wise as prediction markets are still finding their regulatory footing, having been essentially banned in the United States until just the fall of last year. Critics have continued to argue that prediction markets are exposed to insider trading risk. And on the cost side, Robinhood had slightly bad news, saying it expected higher expenses associated with these growth areas, including Robinhood Ventures, which will provide opportunities to invest in private companies. Taking a step back though, overall adjusted ebitda, which is a useful measure of profit, was huge for this quarter, hitting over $740 million with margins near 60%, which is pretty healthy. So what's the market's problem? Well, even after today's decline, Robinhood stock is up over 250% year to date. And at an enterprise value, which is total valuation close to $130 billion, it's trading at a big multiple of over 70 times profit. Well, one headline from Morgan Stanley today aptly summed up market sentiment, quote, long term bulls, but look for better entry point. Better entry point is a jargonized way of saying look out for a price cut. We're going to keep watching. Coming up. Meanwhile, Planet Fitness reveals its greatest competition and it's not another gem. And we can now buy fractions of shares with most brokers. So why are Netflix servicenow and others still doing stock splits? Well, Brew Markets Daily is sponsored by Public, the investing platform for those who take it seriously. And before the show today, our producer John mentioned a feature he recently found on Public.

[John Pateau]

That's right. I've been getting portfolio insights from Alpha Public's AI powered research assistant. And then I discovered Alpha can do recaps of earnings calls. And that's where I love getting the inside peek into a business. As soon as it shares its updates.

[Ann Berry]

Public gives you smarter context in which to use a wide range of asset classes, offering the tools you need to build and manage your wealth, whether it's with stocks, options, bonds or crypto. So find your account in minutes or less. Get started at public.com brewmarkets that's public.com.

[John Pateau]

BrewMarkets paid for by Public Investing Full disclosures in Podcast Description well, we are.

[Ann Berry]

In the heart of earnings season and so we thought to dig into a couple of the big ones that caught our eye today, starting with Duolingo, the language learning app, which is becoming more of a broader educational platform. John, dig in.

[John Pateau]

All right, that's right. Just as A reminder, Duolingo IPO'd in July of 2021, market cap of $8.5 billion. And the company delivered some good numbers today.

[Ann Berry]

Yeah, revenues up over 40% to $272 million, beating estimates active daily users and paid subscribers beating both up around that 35% year over year growth mark. Daily active users now at nearly 51 million, which I was actually really quite astonished to see. That's a big number.

[John Pateau]

Yeah, that's a, that's a big number. And EBITDA over $47 million. So why were shares down 28% today? After that, earnings we've got subscribers are up. The numbers are up. And the headline is the company has shifted its investment strategy to focus on long term initiatives. Basically, the app is going to prioritize keeping new users rather than steering them to pay for a subscription right away or monetizing with ads. And so the CEO and co founder Louis Van Ahn said on the call today, we're doing this now because we want to keep growing users for a long time and because of our increasing conviction that AI can fundamentally change what's possible in how we teach. If we develop an app that is more engaging and teaches as well as being sort of like a personal tutor across multiple subjects, we think we'll become a much bigger Business in the long term.

[Ann Berry]

So there's so much going on that feels embedded in there. And I come to this with a healthy dose of skepticism because the share price down over 25 today and my gut on why that is a couple of fold. First of all, the CEO again Louise Van on saying we're trying to get people engaged across multiple subjects, multiple languages is no easy feat. I can only speak for myself. You know, I try to learn one language at a time and even that is a pretty difficult thing to carve out the time and energy to do.

[John Pateau]

And they're talking languages but they're also talking subjects. Chess has become popular point on their, on their app.

[Ann Berry]

Yeah. So multiple different hobbies, let's call it or points of education. You know, again there's only so much free time and getting that sort of share of wallet equivalent of people's time is not going to be an easy lift. Just one person's view. The other piece of the quote that you read out, John, that jumped out at me is just to repeat it that the company wants to quote, prioritize keeping new users rather than steering them to pay for a subscription right away or monetizing with ads to that to me sounded like code for trying to monetize people too early is not working. We are seeing attrition and we need to stop the bleeding. That's what it sounded like to me. I don't know if you had a different perspective.

[John Pateau]

No, the same thing. People aren't having a good user experience in the free version and so they don't even stick around.

[Ann Berry]

It's really difficult. And also when I think too about the amount of education that's available, other places competing for our attention and time like YouTube is just one place.

[John Pateau]

Sure.

[Ann Berry]

There's lots of educational content there including things like learning how to play chess. It may not be interactive but you get the basics sort of taught to you as a non interactive video. Well, Duolingo, as you just pointed out, not just language learnings, it's looking to be a broader AI enabled education platform. It is worth just touching on a couple of other folks peddling the same thesis. Right. We recently discussed on the show Chegg, which started life as a textbook rental business. Do you remember this?

[John Pateau]

That's right. And they have a new CEO who is returning to the company.

[Ann Berry]

Yeah, returning, yeah. Daniel Raisinsweig.

[John Pateau]

Exactly. And their Stock is down 42% year to date. Chegg. They're looking for a turnaround. And then also you spoke to Udemy's CEO on After Earnings Sister podcast, their stock is down 37% year to date.

[Ann Berry]

That one's interesting. So Udemy actually started life as sort of a marketplace for education. Lots of different content providers could turn up, and the folks would purchase to pay from the teacher or the educator who resonated the most. Udemy basically saying, that's not really working for us. So well, we really need to get a handle on the quality of the content, content that's out there. As you said, stock down nearly 40% year to date. Duolingo shares down 40% each year to date. 40% seems to be the number for all of these popping on down. So it's a really tough time for all of these educational players trying to figure out what to do with technology.

[John Pateau]

And one more nugget from the earnings call, which also explains maybe why the market was down on the stock today. Do you remember the headlines that Duolingo made back in the spring? The CEO pledged that Duolingo would be AI first. And there was a lot of backlash, especially on LinkedIn, where there was some concern that maybe Duo Lingo would get rid of all of its human employees. And so at the time, Duolingo pulled its ads, Remember the ads with the owl, and, you know, it would sort of stalk you to take your lessons. Well, they were. They were very popular, but at the time, I think Duolingo was just trying to get out of the hot zone, trying to pull back.

[Ann Berry]

Yeah.

[John Pateau]

Well, the CEO referred to those ads today on the call as their unhinged ads.

[Ann Berry]

Yeah.

[John Pateau]

And they. They pulled them for the last quarter, but they're going back to unhinged ads because it really drove a lot of people to the app. But there are analysts who are concerned that captured a moment with those ads. That moment has passed, and they can't just go back to doing them now.

[Ann Berry]

Right. So bringing crazy back is just going to be what happens. You know, I do remember also the little owl, the green owl, the mascot got retired. Do you remember, for a moment? And Dua Lipa. Do you remember this? Dua Lipa literally went out on social media saying, duolingo and the owl. You know, I'm going to miss the mascot. So to your point, that does have a real moment in culture. And trying to get that back, it is hard. These moments can be fleeting. Let's move on to talk about Planet Fitness, because when it comes to wellness, when it comes to gyms, these kinds of businesses tend to have a very mixed performance. Now, Planet Fitness and I always have to remember just how big of A business it is market cap $8.8 billion. Shares up over 12% at the start of today. And that's because the revenue that came in in the earnings report beat estimates came in at over $330 million and adjusted EBITDA, that magic, magic sort of metric that folks look at to look at a profit measure that more closely resembles cash flow, increased by nearly $18 million to hit 141 for the quarter. Now 35 new Planet Fitness clubs were open system wide in total. And this is again where I have to remember the scale of this 2,795 locations. Can you. 20 million members, right? 20 million members.

[John Pateau]

It's enormous. And what I was struck by listening to the call is that Planet Fitness knows its customers, it knows these members. And we know that that's called the Judgment Free Zone. That was sort of the first gym that I can remember where they were like, just come on in. Don't be intimidated by muscle builders and stuff like that.

[Ann Berry]

Yeah.

[John Pateau]

And an analyst on the call asked who the biggest competition is for Planus Fitness. And the answer was, I. I think our biggest competitor is a fear of walking in the front door.

[Ann Berry]

Oh, interesting.

[John Pateau]

And that just goes with their whole theme. They also highlighted that they're trying to get more people into working out by having a high school summer pass program. And this last summer they invited 3.5 million teens to come and work out for free in their gyms. It's great, Ann, except my friend who goes to plane at 50.

[Ann Berry]

Your friend Air quotes, right?

[John Pateau]

Exactly.

[Ann Berry]

Not you. You're talking about a friend.

[John Pateau]

Oh, it is my. He works out and he was complaining to me the last couple summers. He's like, well, Planet Fitness basically opened up a daycare center. So he's unhappy about this.

[Ann Berry]

He doesn't want the teens around.

[John Pateau]

He doesn't want the teens around. And the company said that they have been converting in the single digits these teens then in the fall sometimes become customers. Yeah, Members. But I said to my friend, and this is interesting, go to Equinox, go to Gold. And I think the point is Planet Fitness is where everyone's welcome and you can go there and it might be a mix of people and if you want to pay more, you can have a different kind of experience.

[Ann Berry]

But your buddy doesn't want to welcome the teens, so maybe he should be not at.

[John Pateau]

He needs to move on to a.

[Ann Berry]

Different or not be a curmudgeon. John's friend, we love you. Don't take that personally. We've both got stories about A friend. I was literally, until you lob that one in, going to tell you, which I'm going to tell you anyway. Sorry about my friend. It's a. One of my close girlfriends and we were actually at the Knicks game. I love live basketball, by the way. And I guess inspired by watching all this athletic activity, we started talking about our own workout regimes. And I use Class pass, so I don't know if anyone else does, which means you pay a subscription every month. And then you can go to these. I go to, like, bar classes or I go to Soul Cycle. And there's just some flexibility around when. And it's sort of cost effective. And my friend looked at me and said, I don't do any of that and I don't have time. I don't want to deal with the choice. I go to Planet Fitness and I said, why? She goes, because it's always empty.

[John Pateau]

Oh, all right.

[Ann Berry]

It's always empty. And I can go and nobody will see me. And half the stuff doesn't work. This is her right. And, you know, maybe one in three of the running machines will work, but I just go in, I get out, I get my workout done, and I literally don't see a soul in there.

[John Pateau]

And I'll also make another point. Whether or not she sees people there or not, there's people paying their membership.

[Ann Berry]

Yes, let's talk about that. Let's wear that now. On the call, the CEO did mention, quote, peak join season, which intuitively is January, people's New Year's resolutions. They want to get back into shape. So no surprise, one last quote from the call. Quote, we're excited to announce that we'll be sponsoring New Year's rockin even next month in Times Square for our 11th consecutive year. So a bit of a New York tradition that close out the year just to stay on the thought for a moment, but move on to a slightly different public company, Peloton announcing its earnings today. Shares are down over 20 this month. Now, this morning, the company announced it's recalling 800,000 of its bikes due to safety concerns with the seats. Not the first time, John, by the way, that Peloton's had safety concern.

[John Pateau]

It's been years, these recalls going on.

[Ann Berry]

For five years now. Peloton has also been expanding, quote, into commercial spaces like hotels and universities. That didn't feel like very new news to me. I feel as though I've seen them in gyms and lots of commercial spaces, but one that we're going to keep an eye on. Peloton clearly not having an impact much on Planet Fitness, though. Shares up 23% year over year. And interestingly for Planet Fitness, up 53% over the past five years. So it's managed to keep going as people have figured out their budget and where to spend when it comes to health and wellness.

[John Pateau]

All right, and finally, I want to talk about three companies that reported in the last 24 hours.

[Ann Berry]

Quick Fire.

[John Pateau]

Yes, exactly. That's AMC, Cinemark. Those are the two movie chains. And of course, Warner Brothers Discovery, which has been in the news for putting itself up for sale.

[Ann Berry]

Yeah.

[John Pateau]

And AMC represents about a quarter of movie theaters in the United States. Cinemark and Regal are both about 15%. And this is what I wanted to point out on the earnings call from AMC today. This is just shows you how important movies are for the movie theaters. And the theaters can't control the flow of movies. So this is a quote due primarily to the timing of major studio film release dates. A weak first quarter was followed by a blazing hot second quarter, which was then followed by a softened third quarter. We continue to expect, however, that the year will culminate in what we hope will be quite a strong year end. Hello, Universal's Wicked for good. Hello, Disney's Avatar, Fire and Ash. And so that's AMC's CEO, excited about what's coming. But you can really see how important it is, the pipeline of movies. And just briefly, Cinemark said similar. The same thing they said the third quarter pointed out that movie attendance was down 10% year over year. And so they're saying it really doesn't have to do with us. It has to do with the movies. And so, Ann, here's my point. Yes, Warner Brothers Discovery is up for sale. That's a Hollywood movie studio. They put out about a dozen movies every year. Paramount has already expressed three bids for Warner Brothers, Comcast, Amazon, Netflix have all expressed interest. The concern is Paramount already has a studio. So does Amazon. They have mgm. Comcast has Universal. If one of these companies purchases Warner's, will they merge? Will they just shut down Warners? Maybe they'll keep Warner Brothers separate and they'll continue to produce movies. The other thing is that if Netflix purchases Warner Brothers, Netflix has said in the past they are not in the movie theatrical business. And so the concern is that Netflix gets the library of Warner Brothers, puts it on streaming service. But there is a concern that depending on how this deal could go, yeah, we may be seeing fewer movies from Warner Brothers and that could be a big hit to these movie theaters.

[Ann Berry]

You know, you said just Like Netflix in the past has said that it's not really in the business of getting people to go to the movie theater. They want people streaming at home. Home.

[John Pateau]

Yes.

[Ann Berry]

That being said, K Pop demons.

[John Pateau]

That's right.

[Ann Berry]

Right. Does go counter to that was, you know, a great piece of intellectual property that did well in the movie theaters. So perhaps things are evolving. One thing we talk a lot on the show about is this idea that digital and experiential are maybe two sides of the same coins. There may be some more flexibility there and trying to get streamers and movie going, theater going activity together. Look, shares in AMC up 3%. Cinema down about 1%. Warner Brothers discovery down about 1%. There is a lot going on in media not just in the mov but also in other parts including news. So we're definitely going to keep watching this sector holistically. Well, let's take a quick break and when we come back, stock splits AKA a lesson in investor psychology. And now a word from our sponsor, Surf Air Mobility. Surf Air Mobility is behind a major shift in transportation. They're building an AI enabled software platform powered by Palantir that's being built to serve as an intelligent operating system for the air mobility industry.

[John Pateau]

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[Ann Berry]

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[John Pateau]

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[Ann Berry]

Surf Air Mobility Inc. John, we have a question from the audience today.

[John Pateau]

That's right, Tyler in Columbus wrote. Ann, I read that Netflix is doing a stock split. What is that and why are they doing it?

[Ann Berry]

All right Tyler, stick with me on the technical stuff here because we are going to get to talk about some fun psychological phenomena. And thank you for this question because we are more likely to see more stock splits. ServiceNow just announced its doing 1, 2. Well, first of all the math. A stock split increases the number of shares outstanding while proportionally lowering the price per share. So suppose a public company with a stock price of 100 bucks does a two for one split and you have one share today you are holding today is worth $100. After the split you'll get two shares for every one that you hold, but each will be worth half as much, $50 per share, but the total value of your holdings is still 100 bucks. So Netflix has announced that after the closing bell on November 14, the company will have a 10 for 1 split, which means that every investor who owns one share on November 10, which is called the date of record, will Instead automatically own 10. But each share will be worth 1/10 10% as much. Now, the share price of Netflix today is about a thousand dollars ninety cents. And if it doesn't change much between now and then, then the per share price would drop to about 109 bucks. So, fairly simple math, but the reasons for this are complicated and very exciting, at least to a nerd like me. Well, this is the third stock split for Netflix since it went public in 2002, with the last one in 2015. And that reduced the company's per share price to about a hundred dollars from 700. So there seems to be some magic to this $100 per share range. Well, look, if there's no change to the value of holdings and as a result no change to market cap, this all begs the question, why do companies bother to do this? Historically, the main reason has been to create accessibility. When share prices climb into the hundreds or even thousands of dollars, they can feel out of reach for smaller investors. Netflix's share price has gone from just over $310 five years ago to again about $1,000.90 today. Now, splitting a stock lowers the price tag, which in theory makes it easier for more people to buy in, boosting trading liquidity and keeping the company stock within a quote comfortable range for retail investors. But today that feels like an irrelevant argument because investors can actually buy fractional shares on most trading platforms. So that means someone can invest say $10 to buy just 5% of a single share in Nvidia. So remember again, a stock split doesn't make a company fundamentally more valuable. It just slices the same pie into more pieces. Nonetheless, stock splits often do result in short term abnormal returns, with companies seeing an average 2 to 4% increase in total value around the split announcement Again, even when nothing has fundamentally changed. This is a phenomenon that researchers call the announcement premium. And here are the psychological elements to all this. Academics studying the field of behavioral finance have tried to explain explain why this happens and here are a couple of the reasons. One is anchoring bias. Investors might anchor their perceptions of a company to the pre split price. So the post split one feels cheaper even though it isn't there's also availability bias. The increased attention from a split may make the stock more available. Investors minds potentially driving demand. Investors may feel better owning a whole share instead of a fraction of 1. So even though fractional shares are widely available, a lower sticker price can increase trading volume. There's something called gambling preferences. The lower post split price can make the shares feel more like a lottery ticket to some investors. So they may feel they have more upside potential owning 100 shares at $10 each than one share at $1,000. Again, even though the total investment is the same. And some investors associate stock splits just with successful companies after all their stocks are split because the price has grown really high. Nvidia, as an example, has split its stock six times since its IPO in 1999. Now, none of this is rational. Again, a stock split doesn't make a company more valuable. It just slices the same pie into more pieces. There is, though, one practical reason for doing this that makes sense. Netflix said the reason is because it needs to reset the share price to quote a range that will be more accessible to employees who participate in the company's stock option program. Now, stock option programs often require employees to pay out cash to get their hands on shares, even if that transaction means they ultimately profit from doing it. Buying fractions of shares or exercising fractions of options may not be possible in these programs, even if fractional share trading is otherwise now widespread. So a split that gets that share price down is in fact helpful to employees in that case. By the way, if you're a regular investor with shares in your brokerage account in Netflix, or in any other company that's doing a stock sales split, you may wonder, do you need to do anything about these share changes when they happen? And the answer is, you don't. When a company performs a stock split, the process is seamless for shareholders. The additional shares are literally automatically credited to your account by your broker.

[John Pateau]

Wow. And if you have a question for Ann, send an email or voicemail to.

[Ann Berry]

Brewmarketshoworning brew.com well, it's 4pm on the East Coast. There's the closing bell. The market's wrapping up for the day. We don't have a ticker tape, but we'll throw it over to our human ticker, our producer John that's right, The.

[John Pateau]

S&P 500 was down 1 and a 10% today. The Dow finished down 8. 10 of a percent and the NASDAQ finished down nearly 2%. This story just coming over the wire from the Wall Street Journal Ford Motor executives are reportedly in active discussions about scrapping the electric version of the Ford F150 pickup. We recently covered Lamborghini's pullback from its EV offering in part because fans want to hear that classic loud internal combustion engine. If the electric 150 goes away, the money losing truck would be America's first major EV casualty. Shares in Ford ticked up nearly a percent this afternoon and finished flat.

[Ann Berry]

Well, just as a final thought for today, the shareholder vote we've all been waiting for. Tesla is having its annual shareholder meeting literally right now in Texas and we are waiting to hear what shareholders have to say about the up to trillion dollar pay package that has been proposed by the board for Elon Musk. I've been waiting all day to see when the results of this will break. Not in time for our show. I'm going to be watching it all night. I'm going to post on X and post on Instagram what the result is there just to keep everyone up to date. And we will absolutely be talking about this in coming days and weeks, whatever the outcome may be. That's it folks for today's Brew Markets Daily.

[John Pateau]

Brew Markets Daily is hosted by Ann Berry and produced by John Pateau, Tarek Abdelatif and Emily Milian. Our Technical Director is Lonnie Fiskis, audio assistants by Jim Orzo and the President of Morning Brew Inc. Is Devin Emery.

[Ann Berry]

Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow, same time, same place with a very special episode.

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