public caught the market’s attention during the 2020-2021 savings and investment boom, a period that elevated Robinhood and Coinbase to the public markets. Public, initially built along similar lines to Robinhood, has moved away from payment revenue for order flow (PFOF), added crypto to its service, and expanded its board of directors in recent months.
The mix of products and business decisions seems to be working for Public, at least in terms of leading indicators. According to the co-CEO Leif Abraham, Public comment has 3 million users. The company also announced this morning that it has purchased Otisa startup that allows consumers to buy and trade fractional shares in individual alternative assets.
What type of assets? Otis founder Michael Karnjanaprakorn gave TechCrunch a few examples of assets his company makes available to its user base, including a shoe from a famous basketball player that has a piece of backboard embedded in it (the featured player broke the board in a game) and highly rated NFTs.
The purchase price for Otis was not disclosed, but given that the small company had raised $16.5 million before its sale, by Crunchbase datawe would estimate the value of the transaction in the mid to high eight figures, likely weighted in shares rather than cash.
But more specifically, why is Public buying Otis? And how does that fit into Public’s non-PFOF future? This is what we wanted to understand. Let’s talk about it.
Public x Otis
Otis calls itself the “culture stock market,” which is a pretty good catchphrase when it comes to these things. The company’s service grew to 100,000 users, per Karnjanaprakorn, and 125 listed assets before being sold to Public.
How does Otis work? The company makes public individual assets in what is called a Reg A+ offering, or some sort of lite IPO. From there, its users can buy and sell stakes in the commodities.
Sometimes the underlying asset is purchased wholesale by an individual or entity. In these cases, Otis ensures that the offer is real and then allows the owners of the asset to vote on a potential sale. As with all mergers and acquisitions in the public market, a premium is usually involved.
That’s all good, yes, but where Otis gets even more interesting is in his business possibilities for his new parent company. It is paid when an asset is listed and when users trade shares on the item. According to Abraham, this will equate to 5% in an item’s list and a 2% reduction in secondary trades.
For Public, which has essentially decided to forge its own path in zero-cost equity trading away from PFOF revenue, adding a business unit with a transactional revenue model means its own base income will expand. And if Public can help Otis list more assets and get its users on board the alt-asset bandwagon, alt-asset trading could become a major revenue stream. (The audience has other plans coming up, Abraham says, hinting that something that rhymes with slubskripshlun is on its way this year.)
Karnjanaprakorn believes Public’s growing user base represents a real chance for Otis to expand the market for quoting and trading fractional assets. And its new parent company has certainly raised a lot of capital, giving it financial power that Otis lacked, meaning it might be able to list more items in total, boosting market demand for the company product; Karnjanaprakorn said the nice thing about the type of products Otis lists is that they come with their own fan base, so maybe the small company will be able to drive the growth of users from Public. .
TechCrunch is curious about the data side of the equation. If Otis and Public can list many alternative assets and generate a liquid market around them, they will have succeeded in creating a stream of price data for what are normally illiquid assets. It will be valuable – if they can monetize it within the normal confines of confidentiality.
It’s no secret that Robinhood has struggled since its IPO. Shares of the company peaked at more than $80 per share before falling to $11.75 at the close of trading on Tuesday. This is both a concern and a boon for Public. It’s never great when a public competition suffers if you’re the private competitor. But Robinhood’s declines indicate that PFOF earnings that move perfectly with volume may reverse when underlying volume declines. And the stock market is famous for its ups and downs.
The public still has some way to go to show that they can generate massive revenue from their own approach to consumer commerce with a community orientation. More when we have it.