Friday, February 26, 2021

Robinhood or ‘robbing the ‘hood’? Outrage at on-line dealer grows

Must Read

Timeline of the homicide of journalist Jamal Khashoggi

An unclassified United States intelligence report concluded Saudi Crown Prince Mohammed bin Salman accepted of, and certain ordered, the...

A brand new social capital to good areas

One of probably the most difficult traits that we’ll face within the coming years has to do with the...

On parity with comedian Munawar, 2 others granted bail by Madhya Pradesh HC

Comedian Nalin Yadav and civil engineer Sadakat Khan had been granted ad-interim bail by the Indore bench of the...

United States-based Online dealer Robinhood has been one of many hottest venues on this week’s retail-trading frenzy however its sudden curbs on the shopping for of some scorching shares have raised the ire of consumers, celebrities and politicians who argue it unfairly advantages larger buyers.

The agency has additionally tapped a credit score line in order that it has funds to make sure buying and selling continuity when it lifts the rules.

Robinhood Chief Executive Vladimir Tenev stated on Thursday commerce was restricted in “about 13” viral shares, which embrace GameStop, AMC Entertainment and American Airlines, to guard the corporate and its prospects from volatility.

Those shares slid on Thursday, paring losses solely after Robinhood stated it hoped to raise the curbs on Friday.

GameStop had surged greater than 40 % on Thursday, momentarily pushing the inventory above $500 a share. It has superior greater than 1,700 % this 12 months, growing a rally in retail buying and selling throughout the board and main some brief sellers – merchants betting {that a} inventory will fall – to throw within the towel.


Tenev stated on US monetary information community CNBC that the brokerage had tapped credit score traces “so that we could maximise, within reason, the funds we have to deposit at the clearing houses,” to facilitate extra commerce.

“We understand our customers are upset, we’re doing what we can to re-enable buying in these names,” he stated. “We want to be clear in the communications, and I own that we should have been out there a little bit sooner.”

While different companies equivalent to Interactive Brokers additionally restricted buying and selling, Robinhood’s fee-free and simple-to-use app has made it in style with a brand new technology of small-time merchants and its restrictions drew the heaviest backlash.

‘Live up to your promise’

“Robinhood? Nah y’all ROBBING the HOOD,” tweeted one consumer. “Crazy how you guys would rather watch your company burn to the ground than live up to your promise to provide users with free trade,” commented one other.

Twitter customers additionally complained that Robinhood gave the impression to be promoting their shares with out authorisation. Robinhood didn’t instantly touch upon whether or not it had restricted gross sales, nevertheless Tenev stated prospects have been allowed to promote, however not purchase.

Two prospects sued Robinhood Financial, searching for damages for buying and selling halts in a sequence of shares.

The Bloomberg information company reported the dealer has tapped no less than a number of hundred million {dollars} from its lenders, together with JP Morgan and Goldman Sachs, although Tenev didn’t focus on the dimensions of Robinhood’s borrowing on CNBC.

Meanwhile, anger has unfold past the funding neighborhood with rappers and US politicians on either side of the aisle becoming a member of the backlash.

“This is unacceptable,” tweeted Representative Alexandria Ocasio-Cortez, a Democrat.

“We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”

Her tweet was shared by Republican Senator Ted Cruz who commented: “Fully agree.” Tesla founder Elon Musk, whose shares have additionally been a retail favorite, additionally commented on Ocasio-Cortez’s tweet saying: “Absolutely”.

Robinhood didn’t reply to requests by the Reuters information company for remark.

Celebrities additionally chimed in. “Yo this is a f*****g CRIME what @RobinhoodApp is doing DO NOT SELL!!!”, tweeted rapper Ja Rule.

Founded in 2013 with the mission of “democratising finance for all” by providing commission-free buying and selling, Thursday’s move was seen by many as hypocritical. Many customers shared a tweet from 2016 through which the corporate stated: “Let the people trade.”

“This was always a potential issue with Robinhood,” stated Ian Kar, the co-founder and chief govt of analysis supplier Fintech Today. “When are you responsible for helping your users make good financial decisions, versus allowing them to trade freely?”

Robinhood has seen enterprise increase throughout the coronavirus pandemic as extra homebound customers took to purchasing and promoting shares on-line. The app now has greater than 13 million customers.

While its participating service has made it interesting to thousands and thousands of consumers, it has additionally drawn the scrutiny of critics and regulators who’re involved the corporate could also be encouraging dangerous behaviour in retail buyers.


Latest News

More Articles Like This