What is Robinhood? Why has it restricted trading in GameStop, Nokia?
Individual investors are accusing Robinhood of manipulating the market in favour of hedge funds.
Robinhood, a free-trading app, is receiving a lot of attention after many members of a Reddit forum, Wallstreetbets, encouraged others to buy heavily shorted stocks like GameStop, BlackBerry, and Nokia. Amateur or small retail investors are rushing to buy Wall Street’s most shorted stocks, forcing hedge funds on the other side to cover their losses. However, Robinhood has now placed restrictions on the trading in such high-flying stocks.
What is Robinhood?
Robinhood is a trading platform that claims to make investment simple and democratic and is popular among amateur stock traders. The founders of the company, Baiju Bhatt and Vlad Tenev, were inspired by the Occupy Wall Street protests and wanted to create an app that made the stock market more accessible for individual investors. The platform, which is hosted on an app as well as a website, offers trading tools and stock tips.
What Robinhood has to say about its latest action?
Robinhood announced that it is restricting transactions for AMC, GameStop, BlackBerry, Nokia, and others amid “significant market volatility.” In a blog post, the company said that users can close out positions for certain securities but can’t buy more stocks. It further stated that the company is committed to helping customers “navigate this uncertainty”.
“Our mission at Robinhood is to democratise finance for all...Amid significant market volatility, it’s important as ever that we help customers stay informed,” said Robinhood.
{{/usCountry}}“Our mission at Robinhood is to democratise finance for all...Amid significant market volatility, it’s important as ever that we help customers stay informed,” said Robinhood.
{{/usCountry}}Read | What is GameStop? All you need to know about Reddit-driven stock market play
{{/usCountry}}Read | What is GameStop? All you need to know about Reddit-driven stock market play
{{/usCountry}}How social media reacted?
{{/usCountry}}How social media reacted?
{{/usCountry}}Social media users are calling on people to “hold the line” and avoid selling the heavily shorted stocks restricted by Robinhood. They are also questioning Robinhood’s decision to restrict trading when the company claims to “democratise” finance for everyone. The users are accusing Robinhood of manipulating the market in favour of hedge funds. Robinhood's older social media posts, advocating to let people trade, are being hugely shared on Twitter.
{{/usCountry}}Social media users are calling on people to “hold the line” and avoid selling the heavily shorted stocks restricted by Robinhood. They are also questioning Robinhood’s decision to restrict trading when the company claims to “democratise” finance for everyone. The users are accusing Robinhood of manipulating the market in favour of hedge funds. Robinhood's older social media posts, advocating to let people trade, are being hugely shared on Twitter.
{{/usCountry}}US House representative Ro Khanna said in a statement that hedge fund billionaires should not be allowed to treat the stock market as their personal playground. Referring to Robinhood’s decision, Khanna said that in some cases, retail traders were blocked to purchase the stocks of GameStop but hedge funds were still allowed to trade the stock. He highlighted that Wall Street poured billions into shorting the stock of GameStop to crush the company and put workers out of business.
“We need more regulation and equality in the markets...the future of this country lies in that access and equality across every sector of our economy,” he added.
Calling the move “unacceptable”, House representative Alexandria Ocasio-Cortez has demanded an inquiry into Robinhood’s decision to block retail investors from purchasing stock. Taking to Twitter, Ocasio-Cortez said that it is a serious matter and she would support a hearing if necessary.
