Robinhood users are revolting against the trading app after it stopped trades of GameStop
Ben Gilbert and Allana Akhtar
Robinhood users are furious after the app stopped allowing users to buy GameStop stock on Thursday morning.
The stock-trading app was flooded with one-star reviews on the Google Play store, which lowered its user rating.
Big names like Rep. Alexandria Ocasio-Cortez, Mark Cuban, and Dave Portnoy all publicly criticized the company.
The trading platform stopped allowing users to buy GameStop stock on Thursday morning, allowing users to sell only, following weeks of huge gains — from being below $5 in late 2020 to over $450 per share on Thursday morning.
Users of the Reddit forum r/wallstreetbets encouraged each other to bid up GameStop's stock price, thus causing a short squeeze on the hedge funds betting against GameStop's stock value. As a result, those short sellers lost more than $1 billion in a single day, while the company's stock value jumped by hundreds of dollars per share.
On Thursday morning, Robinhood cut off users from trading GameStop stock (and a handful of other companies), citing "significant market volatility."
That decision caused a massive outcry on social media.
"Robinhood has disabled trading in $AMC $GME $NOK etc, proving that the 'little guy' was never allowed to win in a 'free market,'" the popular newsletter writer Joe Pompliano said in a tweet. "What a joke."
—Joe Pompliano (@JoePompliano) January 28, 2021
—Drew Welker (@dwelkeroutdoors) January 28, 2021
—Mike McLean (@mikemcln) January 28, 2021
The Robinhood app listing received an influx of one-star reviews on the Google Play store, causing the app to average the lowest rating.
Instead of taking commissions on stock trades, the company says it earns revenue through a variety of other means, from financial services to a membership program, Robinhood Gold.
Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital's short positions
Users aren't the only ones criticizing Robinhood publicly.
The billionaire Mark Cuban questioned why Robinhood restricted trading, tweeting: "So are @robinhoodapp and @IBKR ending trading in #wallstreetbets stocks because they are losing their ass on these trades? Or maybe they don't have the cash to enable the trades at this scale? Anyone have any insight on their economics?"
—Mark Cuban (@mcuban) January 28, 2021
Barstool Sports, along with the blog's founder, Dave Portnoy, declared "war" on Robinhood.
"You are scam artists," Portnoy tweeted in response to Robinhood's announcement on restricting trading. "You are crooks. You deserve to be behind bars and you know it."
—Barstool Sports (@barstoolsports) January 28, 2021
Rep. Alexandria Ocasio-Cortez said Robinhood's actions were "unacceptable" and called for "a hearing if necessary" to determine why the company chose to "block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
Sen. Ted Cruz seconded Ocasio-Cortez's tweet. "Fully agree," he said.
Pulte Capital CEO Bill Pulte, a philanthropist, weighed in as well.
"This is what you call rich people trying to confuse you with fancy words," he tweeted in response to Robinhood's statement on why it was restricting stock trades of GameStop.
Robinhood representatives didn't immediately respond to a request for comment.
Ben Gilbert and Allana Akhtar
Robinhood users are furious after the app stopped allowing users to buy GameStop stock on Thursday morning.
The stock-trading app was flooded with one-star reviews on the Google Play store, which lowered its user rating.
Big names like Rep. Alexandria Ocasio-Cortez, Mark Cuban, and Dave Portnoy all publicly criticized the company.
Robinhood users are coming for the trading app's head.
Vlad Tenev, the cofounder and co-CEO of the investing app Robinhood.
REUTERS/Brendan McDermid
The trading platform stopped allowing users to buy GameStop stock on Thursday morning, allowing users to sell only, following weeks of huge gains — from being below $5 in late 2020 to over $450 per share on Thursday morning.
Users of the Reddit forum r/wallstreetbets encouraged each other to bid up GameStop's stock price, thus causing a short squeeze on the hedge funds betting against GameStop's stock value. As a result, those short sellers lost more than $1 billion in a single day, while the company's stock value jumped by hundreds of dollars per share.
On Thursday morning, Robinhood cut off users from trading GameStop stock (and a handful of other companies), citing "significant market volatility."
That decision caused a massive outcry on social media.
"Robinhood has disabled trading in $AMC $GME $NOK etc, proving that the 'little guy' was never allowed to win in a 'free market,'" the popular newsletter writer Joe Pompliano said in a tweet. "What a joke."
—Joe Pompliano (@JoePompliano) January 28, 2021
—Drew Welker (@dwelkeroutdoors) January 28, 2021
—Mike McLean (@mikemcln) January 28, 2021
The Robinhood app listing received an influx of one-star reviews on the Google Play store, causing the app to average the lowest rating.
Robinhood received an influx of one-star reviews on the Google Play store. Allana Akhtar/Business Insider
And members of Wall Street Bets threatened to file a class-action lawsuit against Robinhood, alleging market manipulation.
"Allowing people to only sell is the definition of market manipulation," one post on Wall Street Bets said. "A class action must be started, Robinhood has made plenty of money off selling info about our trades to the hedge funds to be able to pay out a little for causing people to lose money now."
Robinhood, founded in 2013 by the Stanford graduates Baiju Bhatt and Vladimir Tenev, allows users to trade stocks without commission.
"We're proud to have created a platform that has helped everyday people, from all backgrounds, shape their financial futures and invest for the long term," the firm said in a blog post.
And members of Wall Street Bets threatened to file a class-action lawsuit against Robinhood, alleging market manipulation.
"Allowing people to only sell is the definition of market manipulation," one post on Wall Street Bets said. "A class action must be started, Robinhood has made plenty of money off selling info about our trades to the hedge funds to be able to pay out a little for causing people to lose money now."
Robinhood, founded in 2013 by the Stanford graduates Baiju Bhatt and Vladimir Tenev, allows users to trade stocks without commission.
"We're proud to have created a platform that has helped everyday people, from all backgrounds, shape their financial futures and invest for the long term," the firm said in a blog post.
Instead of taking commissions on stock trades, the company says it earns revenue through a variety of other means, from financial services to a membership program, Robinhood Gold.
Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital's short positions
Users aren't the only ones criticizing Robinhood publicly.
The billionaire Mark Cuban questioned why Robinhood restricted trading, tweeting: "So are @robinhoodapp and @IBKR ending trading in #wallstreetbets stocks because they are losing their ass on these trades? Or maybe they don't have the cash to enable the trades at this scale? Anyone have any insight on their economics?"
—Mark Cuban (@mcuban) January 28, 2021
Barstool Sports, along with the blog's founder, Dave Portnoy, declared "war" on Robinhood.
"You are scam artists," Portnoy tweeted in response to Robinhood's announcement on restricting trading. "You are crooks. You deserve to be behind bars and you know it."
—Barstool Sports (@barstoolsports) January 28, 2021
Rep. Alexandria Ocasio-Cortez said Robinhood's actions were "unacceptable" and called for "a hearing if necessary" to determine why the company chose to "block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
Sen. Ted Cruz seconded Ocasio-Cortez's tweet. "Fully agree," he said.
Pulte Capital CEO Bill Pulte, a philanthropist, weighed in as well.
"This is what you call rich people trying to confuse you with fancy words," he tweeted in response to Robinhood's statement on why it was restricting stock trades of GameStop.
Robinhood representatives didn't immediately respond to a request for comment.
The wild trading surrounding GameStop, AMC, and other companies this week is even drawing attention from the White House.
Why did shares of GameStop and AMC soar?
Brett Molina
USA TODAY
Brett Molina
USA TODAY
It has been a wild week for GameStop.
Shares of the struggling video game retailer surged to more than $480 a share Thursday morning before plunging to just over $200 around midday, falling well below their Wednesday close of $347.51. At the start of 2021, shares of GameStop closed at $17.25 on Jan. 4.
The primary reason for the earlier surge? Smaller investors who have banded together in places like Reddit, under the subreddit r/WallStreetBets.
And it's not just GameStop. Shares of AMC Entertainment jumped more than 230% Wednesday as the Twitter trend #SaveAMC spread amid concerns the movie theater chain might file for bankruptcy due to the COVID-19 pandemic keeping moviegoers away.
Even BB Liquidating, the remains of former video rental giant BlockBuster, saw a spike in its price, reports Bloomberg.
So what is going on? Here's what you should know.
What is r/WallStreetBets?
According to a description on its subreddit, it's "like 4Chan found a Bloomberg terminal." It was created in 2012 and has 3 million followers discussing making money and trading stocks, options, futures and more.
After the news gained steam, moderators switched to an invite-only status Wednesday evening. "We are experiencing technical difficulties based on unprecedented scale as a result of the newfound interest in WSB," they said in a note on the site.
Interest in r/WallStreetBets has garnered so much attention that Bloomberg expects the Securities and Exchange Commission will have to look at issues such as these for market influence.
How did GameStop shares jump?
Investors have been short selling the stock – borrowing shares, immediately selling them, then buying them back at a lower price before returning the shares – because of the retailer's ongoing struggles as a brick-and-mortar chain competing with consumers increasingly shopping online.
As those investors bet on GameStop's price to sink, a group of traders on Reddit have joined together to drive the retailer's stock price higher. Posts and threads from the subreddit seem to suggest this as an opportunity to stick it to Wall Street.
One Reddit post describes the surge of these stocks as "a tug of war between tradition and the future."
"Hedge fund managers live in the past, and continue to look down upon the retail investors," reads an excerpt of the post on WallStreetBets. "They truly believe that we, the average retail investors, don't know anything about finances or the market (which may be true), and we're just gambling our money away."
The movement even got the attention of Tesla CEO Elon Musk, sharing the subreddit with a tweet simply saying "Gamestonk!" The billionaire has openly shared his disdain for short sellers over wanting to see shares in Tesla decline.
Reddit said Wednesday afternoon the site is currently down for some users.
How is Wall Street responding?
Trading apps such as Robinhood, TD Ameritrade, E*Trade and Charles Schwab all appear to be suffering from outages, according to Down Detector, a website that tracks issues with online services.
These apps have contributed to a rise in investing among individuals. As the Wall Street Journal reports, individual investors accounted for nearly 20% of shares traded in the stock market, according to Bloomberg Intelligence.
In a statement obtained by USA TODAY, TD Ameritrade said it is setting restrictions on trades involving GameStop and AMC.
"In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC and other securities," said the company. "We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors."
According to multiple reports on Twitter and Reddit, Robinhood has halted trading on GameStop. A representative from Robinhood could not immediately be reached for comment to confirm.
Meanwhile, major investors Citron Research and Melvin Capital have both claimed they are pulling their bets on GameStop.
The Associated Press contributed to this report. Follow Brett Molina on Twitter: @brettmolina23.
Shares of the struggling video game retailer surged to more than $480 a share Thursday morning before plunging to just over $200 around midday, falling well below their Wednesday close of $347.51. At the start of 2021, shares of GameStop closed at $17.25 on Jan. 4.
The primary reason for the earlier surge? Smaller investors who have banded together in places like Reddit, under the subreddit r/WallStreetBets.
And it's not just GameStop. Shares of AMC Entertainment jumped more than 230% Wednesday as the Twitter trend #SaveAMC spread amid concerns the movie theater chain might file for bankruptcy due to the COVID-19 pandemic keeping moviegoers away.
Even BB Liquidating, the remains of former video rental giant BlockBuster, saw a spike in its price, reports Bloomberg.
So what is going on? Here's what you should know.
What is r/WallStreetBets?
According to a description on its subreddit, it's "like 4Chan found a Bloomberg terminal." It was created in 2012 and has 3 million followers discussing making money and trading stocks, options, futures and more.
After the news gained steam, moderators switched to an invite-only status Wednesday evening. "We are experiencing technical difficulties based on unprecedented scale as a result of the newfound interest in WSB," they said in a note on the site.
Interest in r/WallStreetBets has garnered so much attention that Bloomberg expects the Securities and Exchange Commission will have to look at issues such as these for market influence.
How did GameStop shares jump?
Investors have been short selling the stock – borrowing shares, immediately selling them, then buying them back at a lower price before returning the shares – because of the retailer's ongoing struggles as a brick-and-mortar chain competing with consumers increasingly shopping online.
As those investors bet on GameStop's price to sink, a group of traders on Reddit have joined together to drive the retailer's stock price higher. Posts and threads from the subreddit seem to suggest this as an opportunity to stick it to Wall Street.
One Reddit post describes the surge of these stocks as "a tug of war between tradition and the future."
"Hedge fund managers live in the past, and continue to look down upon the retail investors," reads an excerpt of the post on WallStreetBets. "They truly believe that we, the average retail investors, don't know anything about finances or the market (which may be true), and we're just gambling our money away."
The movement even got the attention of Tesla CEO Elon Musk, sharing the subreddit with a tweet simply saying "Gamestonk!" The billionaire has openly shared his disdain for short sellers over wanting to see shares in Tesla decline.
Reddit said Wednesday afternoon the site is currently down for some users.
How is Wall Street responding?
Trading apps such as Robinhood, TD Ameritrade, E*Trade and Charles Schwab all appear to be suffering from outages, according to Down Detector, a website that tracks issues with online services.
These apps have contributed to a rise in investing among individuals. As the Wall Street Journal reports, individual investors accounted for nearly 20% of shares traded in the stock market, according to Bloomberg Intelligence.
In a statement obtained by USA TODAY, TD Ameritrade said it is setting restrictions on trades involving GameStop and AMC.
"In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC and other securities," said the company. "We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors."
According to multiple reports on Twitter and Reddit, Robinhood has halted trading on GameStop. A representative from Robinhood could not immediately be reached for comment to confirm.
Meanwhile, major investors Citron Research and Melvin Capital have both claimed they are pulling their bets on GameStop.
The Associated Press contributed to this report. Follow Brett Molina on Twitter: @brettmolina23.
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