News of the Week (June 30 - July 4, 2025)

News of the Week (June 30 - July 4, 2025)

11 min read
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Table of Contents

Happy holiday to my fellow Americans and happy weekend to everyone. July 4th is generally the slowest news week of the year. Not much happened, but as always, we’ll cover what did. I’m excited for earnings season to pick up again in a couple weeks.

1. Lemonade (LMND) – Reinsurance Renewal

Lemonade is lowering the percentage of premiums it cedes to reinsurance from 55% to 20%. This means the company will retain a much larger portion of its premiums as revenue and will also incur a larger portion of potential losses stemming from these plans. For years, leadership has talked about this proportion falling as the firm scales and matures. Now, it’s ready to make a large jump in this light. This is a vote of confidence in the firm’s underwriting algorithm improvements over the last few years and its liquidity, as it makes strong progress towards income statement profitability.

Over the next four quarters, until Y/Y comps normalize, this change will have a profoundly positive impact on the firm’s in-force premium (IFP) growth – which is directly tied to more revenue generation.

And for context, consider the following example. If Lemonade generated $800M in trailing 12-month premiums, with a 55% ceded rate, it only retained $360M. Over the next 12 months, if it were expected to generate $1.05B in premiums, the same 55% rate would lead us to 31% Y/Y growth. If instead we assume the ceded rate will fall from 55% to 20%, premium growth would be 133% Y/Y. That’s the kind of growth spurt Lemonade will deliver as a result of this change. From a profitability perspective, this is really where being right about underwriting improvements is vital. If loss ratios continue to nicely trend in the right direction, more revenue will mean more fixed cost leverage and more EBITDA. If underwriting struggles, the added balance sheet risk will mean losses pile up and this could even turn into a negative for profits. That’s not my expectation, but it is important to note. They are placing far more pressure on their underwriting talents based on a growing pile of data and optimism in their ability to price risk.

One more note here. Lemonade explicitly said in the press release that this was voluntary. They said they easily could have renewed at identical terms. Some don’t believe them and think reinsurance was simply unwilling to take 55% of its premiums, forcing Lemonade’s hand. I do believe Lemonade’s team and don’t agree with this skepticism. Two reasons. First, the fees that reinsurance companies are paying Lemonade for these premiums are the same compared to the old contract. There’s no waning pricing power of any kind. Secondly, Lemonade seamlessly renewed 55% rate contracts through multiple years of an awful environment for reinsurance. That capital market was greatly challenged and it was still able to renew. I’m excited about this tweak to Lemonade’s business model. All of the loss ratio data we’ve seen over the last two years points to them being ready for this change.

2. Starbucks (SBUX) – Stores

Starbucks plans to renovate 10% of its USA stores in the next year and all of them over the next 3 years. Under the old team, Starbucks ran their stores like cold assembly lines. They ripped out seating, removed amenities, cut the condiment bar and attempted to treat their stores like distribution centers. Not only did that turn customers away, but it also created crippling throughput issues. Under new CEO Brian Niccol, Starbucks is determined to reclaim its community coffeehouse reputation and create a warmer, more inviting in-store atmosphere. Aside from better seating, other aforementioned changes include ceramic mugs, some free refills, free non-dairy milk add-ons and more. The company still has a few more quarters to get through where results will continue to look bad. As we approach the new year, I expect margin accretive, mid-to-high single-digit revenue growth to resume.

3. Robinhood (HOOD) – Crypto Product Event

Table-setting:

To start the presentation, leadership conveyed strong optimism in the brightening regulatory environment for crypto. In Europe, “clear regulations” are offering “clarity to unleash financial innovation,” while the USA is now “catching up to the rest of the world” after “years trying to obliterate the industry.” Robinhood is eager and ready to take advantage of this momentum. Fortunately, the innovation it presented at this event doesn’t entail meme coin speculating, but real, impactful product releases that can actually drive utility.

I thought this was an encouraging event for the company. They continue to rapidly innovate and roll out compelling product innovations to keep the user base increasingly engaged and growing. The coverage below makes it more clear why the stock reacted positively this week. It marks Robinhood’s push to tokenize all assets, unlocking tradable access to them for the masses and giving its financial engine more products to cross-sell. These are the kinds of debuts that can help Robinhood become a bit less reliant on cyclical options contracts and speculative cryptocurrencies to drive such a large portion of its results. The stock price certainly reflected that opinion throughout the week and I think the coverage below will make it clear why. Let’s dig in.

EU Perpetual Futures:

Robinhood is adding its Robinhood Crypto app to all remaining countries in the European Economic Area (31 total). It was already in 6, and will now add the remaining 25. As part of this news, the app is rebranding to simply “Robinhood”, and the product announcements made it clear why that’s happening. First, they announced a perpetual futures (no expiration dates) crypto product for their European customers. This news was born from a disdain for competing products among its user base. These users hated the clunky interfaces, complexity, limited availability and confusion with setting and modifying orders. They were forced to use the products due to a lack of viable alternatives. Now Robinhood has them. This greatly reduces clicks and pages to complete orders, which, like for PayPal and Shopify in commerce, should raise order completion rates. It offers an easy slider to control order size, up to 3x leverage and an ability to precisely set where your margin is allocated. Establishing profit and stop-loss triggers is also wonderfully easy under this new design.

  • This will be released in the EU this summer and will debut in the USA as soon as regulators approve perpetual crypto futures.
  • As an important aside, its recent purchase of Bitstamp (highly-regarded crypto exchange) provides the plumbing needed to offer this product. 

Tokenization:

Tokenization, or creating digital tokens on a given blockchain that convey secure, guaranteed and even fractional ownership of a specific asset, was the theme of this event. I believe this is really where blockchain and the crypto space can really shine.

To start, Robinhood is tokenizing shares of publicly-traded U.S. stocks for European customers. This will broaden access to these assets, remove hefty commissions associated with trading them and unlock 24-hour transacting during business days. There are a few hundred stocks and ETFs available through this blockchain-based product, with thousands more coming. The company took us through a workflow demo of how an EU customer would buy a share of a stock via token vs. U.S. customers simply buying common equity. Interestingly, private company tokens from OpenAI and SpaceX are also available to EU customers.

The exciting part of this is that the interface is essentially the same. People don’t need to understand the depths of blockchain technology to use this product. It simply feels the same as buying an Amazon share on Schwab today. There are detailed explanations of the technology for those wanting it, but they’re only shown when requested – not by default. This makes the interface quite clean, yet packed with information for interested customers. While this simple workflow is commencing, Robinhood rapidly routes orders between brokers, market makers/exchanges and its “tokenization engine” to mint a single token per each purchase representing a single share. Eventually, Robinhood will integrate Bitstamp into this process to enable 24/7 trading. After that, it plans to enable self-custody of these assets to take tokens out of Robinhood’s ecosystem. At first, this will be done through blockchain partners, with eventual plans to debut its own blockchain (The Robinhood Chain) that’s more purpose-built for real-world assets like art and real estate.