Popular stock trading app Robinhood was on the lips of every pundit, politician, and punter this week, riding a promise to “democratize finance” — but its denizens are in revolt and its future is uncertain after it restricted trades of GameStop and other unlikely hot stocks.
The app is a victim of its own success — and missteps.
After its users helped goose the shares of GameStop, AMC Entertainment, and some other retail stocks its online boosters claimed were undervalued to meteoric levels, Robinhood on Thursday restricted their ability to make trades. Users could sell but not buy more stock as it underwent high volatility.
We were not forced by anyone to restrict trades,” Robinhood CEO Vlad Tenev told CNBC on Thursday evening. “We did this on our own, but there was no liquidity problem. We did this proactively.”
Some employees said they feared the company was straying from its mission statement according to messages posted on Blind, an anonymous message posting service that verifies corporate email addresses before allowing posting, reviewed by tech website The Information.
“This sets a horrible precedent,” one message read. The “blowback” will be like that when the app crashed during a March rally, except “on steroids,” the user wrote.
Enraged users filed a proposed class-action suit. Regulators have taken notice. Congress is gearing up for hearings. The Securities and Exchange Commission, the country’s top financial regulator, said on Friday it would “closely review actions” by companies that “may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.”
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