‘The 1% don’t want to play the game when everyone else knows the rules.’
That is the consensus of the retail investment community, which continues to reel from the impact of Robinhood’s recent actions. Following a gamma squeeze on several stocks including GameStop (GME) and AMC Entertainment Holdings (AMC) – which was initiated by WallStreetBets – Robinhood made a statement that attracted universal condemnation.
Whilst a class action lawsuit has been filed by Robinhood users in relation to market manipulation, the most recent development in this story has definitively crossed the line of legality.
The empire strikes back
Having limited buying options of numerous stocks on Thursday, the market experienced a dramatic shakedown as investors were unable to open new positions or continue purchasing stock in particular companies. A monumental backlash soon followed, and retail investors pulled no punches.
When Ted Cruz is agreeing with Alexandria Ocasio-Cortez on something, it gives you an idea of just how reprehensible the behaviour of Robinhood has been…
If things weren’t already weird enough, we then had to witness the bumbling mess that is Vladimir Tenev struggle through an interview on CNBC. He is the CEO of Robinhood, and his insipid reading of a script did little to placate an investment community that, frankly, has had enough of his bullsh*t. The sole accomplishment of this interview was to further solidify his status as everyone’s clown of the week; scratch that, year.
If there was any doubt before, it is definitely illegal now
So, onto the latest development in this saga, and I never thought I would type these words about a broker. There have been numerous reports of Robinhood selling its users GME shares without permission. Yes, you read that correctly.
This is totally unprecedented. Never before has a broker liquidated the stocks of its users without permission.
Robinhood has now clearly become Robbinghood, as it illegally betrays the trust of its users by first barricading access to the open market, and then selling their shares without permission to ‘mitigate risk’ for users. It is no surprise to see #boycottrobinhood trending worldwide.
The message is clear: this is war. This has now gone far beyond any controversy we have seen before, and what is truly alarming is that it has been orchestrated so brazenly and so openly. This is an indication of the ever-shrinking accountability of institutions.
If they behave in such a heinous way when fully in the view of the public, with zero fear of reprimand, think about what they get up to behind your back. This is why decentralised finance has so much momentum right now.
A not-so-hidden motivation
For anyone with a functioning vision, it is obvious that Robinhood is tucked nicely in bed with the hedge funds, but exactly what sort of shenanigans are happening beneath the covers?
Robinhood’s direct involvement with hedge funds that have significant short positions in GME shows the conflict of interest in black and white.
The primary motivation for Robinhood is its upcoming IPO. In order to secure a strong financing, Robinhood is reliant on the backing of institutional investors. Whilst this might be an effective short-term strategy for Robinhood, it does seem that it has cut off its nose to spite its face. Good luck finding any retail investors to throw their money into the ring come listing day…
Years of reputation down the toilet
For Robinhood, a platform with years of hard-earned goodwill from the retail investment community, and even a positive review from us, this move appears to have been an unmitigated disaster. It will be extremely interesting to see how Tenev and his team manage to deflect the pitchfork-wielding mob in the coming days. Be sure to look out for our revised review in the near future.
If there is one positive to take from this situation, remember that WallStreetBets has shown that a bunch of little guys can work together to take down some of the world’s most senior financial institutions, if only for a few days. The degree of permanent change that will occur remains to be seen.
Make sure you check out our list of the best alternatives to Robinhood; it could become very relevant over the coming hours.