Robinhood’s Big Blunder

What a bloodbath today for the short squeeze stocks or Wall Street Bets stocks.

What did Robinhood do?!

Robinhood, Interactive Brokers, ETrade and a few other brokerages all announced early Thursday morning that their users were restricted from trading stocks like GameStop, AMC, Blackberry, etc.

This of course caused all of these stocks to tank pretty tremendously since retail investors couldn’t buy shares and it also panicked a ton of investors to sell given these trading restrictions:

Now I’m sure Robinhood and these other brokerages had their reasons but I highly doubt any reason would justify locking out millions of their customers from trading these stocks. Not to mention, they also probably screwed a lot of their users out of a lot of money (56% for AMC shareholders and 43% for GameStop) since their restrictions enabled a lot of short sellers to short the stock pretty significantly and make a killing.

I understand that brokerages need to manage risk but unilaterally locking out their entire customer base from trading certain stocks seems a little extreme.

I think Robinhood undoubtedly destroyed (okay maybe not destroyed, but seriously hurt their brand) by doing this without any warning. A statistic I heard was that 1 in 2 Robinhood users owned one of these stocks, so they effectively messed with half of their customer base. I also saw a survey of 1,000 or so people that 80%+ were planning on or were in the process of moving their funds to another brokerage house. For a company with aspirations to go public sometime in 2021, I’m sure this incident is going to leave a big black mark and will definitely affect their future valuation.

As I am writing this, I read that Robinhood will allow for limited trading on Friday for some of these stocks. It looks like this PR nightmare finally got to them.

Look at what happened to them in the Google Reviews store:

In other news, it looks like there was a huge rebound from the tech sell-off yesterday:

Funny, I don’t even care about that because I’m pretty infuriated by what Robinhood and the other brokerages did, even though I don’t use Robinhood as my primary brokerage since it just seems like total market manipulation.

Also, thank you Fidelity for allowing me to continue to trade freely.

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