Optimally the result is Robin Hood is removed from the play and apple store for willfully defrauding their customers. Very real damages were suffered as a result of their willful actions. There was no warning and there was no way they did not know harm would come. Also if no retail traders could buy, who was buying the shares that they were forced to sell? If it was the short hedge funds, that has got to be a criminal conspiracy level charge.
It's a bubble. Bubbles pop. Robinhood's argument would be that they prevented harm to investors by preventing them from putting money into a bubble that was going to pop anyway. As soon as this hit the news you got all kinds of regular people wanting to get in on the action, not connected to WSB.
Bubbles do pop, and this was clearly a bubble but this was not a popping bubble. This was someone picking up their ball and going home. They can make whatever argument they want, we will see how it is litigated out. It was a clear coordinated action though across several brokerages.
I read that GameStop was at one point worth $24B. Do you really think that's a realistic valuation? This bubble was always going to pop, the question was not if but when.
Sure let r/WallStreetBets and Wall Street battle it out. But I don't think that you are accounting for the ordinary people who would read about an amazing way to get rich quick in the news and decide to buy in. That's when the real bubble starts.
Bubbles pop all the time, and retail investors get fucked hard each time. Remember the housing bubble in 2008? How many people got foreclosed on? Did they have a Robinhood app to protect them? Absolutely not. Melvin Capital owns billions of dollars, it's not allowed to get fucked hard. Robinhood users, on the other hand, have access to a couple million at most. That's poor people levels of money. There are no golden parachutes for poor people.
Funny how that works. An algorithm, a computer, can ban your entire virtual presence at a whim, with no recourse. (talking about Google obviously).
But the opinions of incensed humans aren't worth the rollback it takes to "correct" the problem.
The entirety of google is a money making machine intelligence serving it's few wealthy owners, and absolutely disrupting and destroying everything else.
We need to take the torch to our big tech overlords.
My guess is that Google will get involved. It's not the first time a mob is trying to destroy the rating of an app. But their rating before all of this drama is not going to last; that's for sure.
But the app is broken. They are not allowing you to buy shares. Why should an app that decides you can't buy certain shares, and they auto-sells some shares you own, be rated highly?
Robinhood was always owned by the same Wall Street fat cats its users hate. They even sell the data on what retail investors are buying in real time to allow industry investors to take advantage of it.
If anything it’s amazing that it took this long for anyone to notice.
Because many people on social media encourage other people to give the app 1-point rating. That's something Google need to protect against. The poor rating should happen organically. But regardless, they are fucked.
So because -company- does illegal thing and people respond by using whatever means they have Google should silence the masses of disaffected users just because some people changed their rating? That is some grade a:
"It is difficult to get a man to understand something when his salary depends upon his not understanding it." -Upton Sinclair
Google doesn't care whether Robinhood succeeds or not. It cares whether people trust the Play Store ratings (and more broadly, trust the Play Store itself). They'll do what's needed to achieve their goals, not Robinhood.
it similar to how hacker news penalizes submission that rally for upvotes (specifically I remember a discussion about how posting links of your submission to twitter can penalize it)
What Robinhood is doing now is unethical and illegal. By limiting to users to only selling these stocks Robinhood is manipulating the market.
Citadel is a major source of funding for Robinhood. Citadel owns Melvin Capital Management. Melvin Capital Management is on the hook for billions in losses for their GameStop shorts.
How can it be more clear than this? People should be warned away Robinhood after this. Robinhood & Citadel should both be sued for manipulation of securities.
Thousands (millions?) Of people lost money / opportunity because of the app. Then those people rate what they think of the app - that ir cannot be trusted to act in their interest.
Why should Google protect them against consequences of their own decisions?
Excellent point. This vote-mob isn't due to some extraneous BS like some other ones, it's a response to an unexpected and customer-hostile service restriction.
I don't see how anyone could trust Robinhood with their money in the future.
Do you expect a trip down the highway will be free of highway robbery? It's called "highway robbery" for a reason... If you don't like it, stay off the highway!
While vote flooding via some confined social circle is a form of trolling I don’t think this case fits that criteria. This news isn’t limited to a subreddit. This news is everywhere, suggesting any vote flood is more likely natural and organic than not.
It's honest reviews though? I had a 5 star rating on the app and loved it. After what they've done today, I am switching brokers, and changed my review to 1 star. I would honestly no longer recommend Robinhood to anyone.
A stock trading app that encourages you to trade options, and then randomly(?) closes your positions should not only have a 1 star review, it should not be allowed to operate.
Actually, given that RH is currently only allowing people to sell their positions, and not buy into them, the only correct step is for the app stores to only allow RH to be uninstalled, and to block any new installations. All for the financial well-being of their users, of course.
By mob you mean the users who are justifiably upset the app is not working as expected by not allowing them to buy and forcing sales without user permission.
The sells were appropriate if bought on margin (once the share price took a dive). The thing is, RobinHood refused “buy” order that were completely inline with the margin requirements, and that caused the share price to dive.
Seems to be a coordinated move among all retail browsers (including IB according to people on this discussion - despite publicly claiming they are just hiking margins).
Basically, as of this morning, retail clients could only sell, whereas institutional clients could buy and sell as they wish.
Doesn’t sound remotely ok. In fact, sounds completely entirely not ok, and likely illegal (but I am not a lawyer)
> RobinHood refused “buy” order that were completely inline with the margin requirements, and that caused the share price to dive.
This is just a conspiracy theory. It doesn't even make sense. If GME was objectively such a good bet, you really think that those institutional investors out there were simply ignoring it? That Robinhood's users alone were the sole reason for the speculative spike in this stock?
This is a SCAM. Robinhood users were the VICTIMS. And I won't speak to their motives, and am no real fan, but the truth is Robinhood saved you people a ton of money by refusing those trades.
In the modern world the right to waste money is held to be very sacred - I have always viewed casinos as a great money -> fun conversion machine for those who can sensibly enjoy it... but for those who can't there isn't anyone stopping them at the door and saying "We already have 90% of your money, why don't you go home and enjoy a quiet evening of netflix".
The stock market has a long reputation of saying "Well, sucks to be you" when various scams are committed - even when a hedge fund manager burns through a bunch of retirement funds and then shows up at the company demanding their annual retainer so I am quite reluctant to buy that this one instance is when altruism is coming in to play.
A bunch of people are choosing to loose a bit of their money in exchange for warm fuzzy feelings - I think it's absolutely idiotic but then again I don't tend to patronize casinos either. If there is someone behind this running a pump & dump scam they absolutely should be prosecuted as normal, but falling victim to a financial scam on the stock market is one of those properties capitalist libertarians always hold up and they can't change their mind just because this one instance ended up screwing them over instead.
Margin accounts have capital requirements. If you’re over leveraged, they will liquidate your positions to ensure you have capital. This is standard. If people didn’t know about this, they have no business with a margin account.
1. Robinhood accounts are all margin by default. Most novice investors don't know the difference. They should, but I would wager Robinhood doesn't spend a lot of time educating people about this.
2. Long positions (buying and holding stock) aren't leveraged. There is no capital risk to holding a stock. If the sales of GME are entirely based on other positions being underwater, then sure, but it seems at least some of the examples provided aren't in that situation.
A broker can change margin maintenance requirements at any time, including for shares bought with margin. When using margin, a broker has wide latitude to liquidate positions of the account using margin.
Robinhood let’s you borrow money to buy stocks. If you borrow $10k to buy GME at $300 and it dropped to $100. There’s a risk to RH that you won’t be able to payback the loan. RH most likely will liquidate the position before it even hits $100 to mitigate the risk on the loan depending how leveraged you are.
I thought RH only allowed margin if you paid the monthly fee? Or, are you talking about margin for purposes of settling so you can trade again before a sale is fully settled?
It turns out that Robinhood accounts are margin by default, which is not really standard practice. I couldn't prove that this behavior (closing held positions without consent) was intended with that design, but it does feel pretty gnarly.
e: I'm leaving my original comment below for posterity, but I learned upthread that I was substantially misinformed here. Robinhood accounts are by default margin accounts, and their documentation describes this in an incredibly misleading way (https://robinhood.com/us/en/support/articles/robinhood-accou...):
> When you sign up for a new account, you’ll automatically start with a Robinhood Instant account, which is a margin account. This means you’ll have access to instant deposits and extended-hours trading. You also won’t have to wait for your funds to process when you sell stocks or make a deposit (up to $1,000).
I stand by my claim that margin accounts necessarily require forced liquidation, but this is pretty indefensible.
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If the stocks were bought on margin it's entirely non-objectionable. Forced liquidation is a well-known practice that's fundamental to margin accounts as a concept - without it, a margin account is just an unsecured loan, and nobody's going to offer the average margin trader a low-cost unsecured loan for stock speculation.
4. Liquidation. In the event of the death of the Customer, or in the event the margin in any account in which the Customer has an interest shall in either Robinhood’s or the Introducing Broker’s discretion become unsatisfactory to either Robinhood or the Introducing Broker, or be deemed insufficient by either Robinhood or the Introducing Broker, Robinhood is hereby authorized; (a) to sell any or all securities or other property which Robinhood may hold for the Customer (either individually or jointly with others); (b) to buy any or all securities and other property which may be short in such accounts; and/or (c) to cancel any open orders and to close any or all outstanding contracts; all without demand for margin or additional margin, notice of sale or purchase, or other notice or advertisement, and that any prior demand or notice shall not be a waiver of its rights provided herein.
(emphasis added, and if you like that there's an arbitration agreement too.)
WE CAN SELL YOUR SECURITIES OR OTHER ASSETS WITHOUT CONTACTING YOU. Some investors mistakenly believe that their brokerage firm must contact them for a margin call to be valid, and that their firm cannot liquidate securities or other assets in their accounts to meet the call unless the firm has contacted them first. This is not the case. Although we may attempt to notify you of margin calls, we are not required to do so. However, even if we have contacted you and provided a specific date to meet a margin call, we can still take necessary steps to protect our financial interests, including immediately selling the securities without notice to you. We may forcibly liquidate all or part of your account without prior notice, regardless of your intent to satisfy a margin call, in order to protect your interests or our interests.
YOU ARE NOT ENTITLED TO CHOOSE WHICH SECURITIES OR OTHER ASSETS IN YOUR ACCOUNT(S) ARE LIQUIDATED OR SOLD TO MEET A MARGIN CALL. Because
the securities are collateral for the margin loan, we have the right to decide which security to sell in order to protect our interests.
WE CAN INCREASE “HOUSE” MAINTENANCE MARGIN REQUIREMENTS AT ANY TIME AND ARE NOT REQUIRED TO PROVIDE YOU ADVANCE WRITTEN NOTICE. These changes in policy often take effect immediately and may result in the issuance of a maintenance margin call. Your failure to satisfy the call may require us to liquidate or sell securities in your account(s).
A margin call that liquidates a customer is not only perfectly reasonable but responsible on the part of the broker. I would never hold it against Robinhood to liquidate positions or have restrictions on buying/selling stocks where the broker could be at risk.
The problem is that Robinhood is selling positions that are fully covered by their clients as well as prohibiting the buying of shares even when the purchase is 100% covered by the user.
I've been in this industry for 15 years now, including obviously the great recession, the flash crash, brexit, and a host of highly volatile events resulting in massive market swings and this is absolutely unheard of. I've never seen a broker prevent its clients from buying shares or liquidating shares that are fully accounted for and pose no risk to the broker.
@Kranar exactly. the actions of the gme swarm are reasonable given the positions and the patterns of actions we all recognize from short sellers. until now, short sellers have pretty much been playing a game of poker where no one ever called their bluff. Of course, the short sellers that lost out on this can just blame it on covid and get bailed out.
They're not reasonable. Just because someone has a short position doesn't mean you can stake a position deliberately to trigger a squeeze and profit from the result. That's exactly what the GME swarm has been doing.
"Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal." - https://www.sec.gov/investor/pubs/regsho.htm
I wouldn't be surprised if Robinhood and other brokers' compliance teams made the decision that the penalty for shutting down trading was less than the potential fallout for enabling illegal market manipulation behavior. Just because it's coordinated online between individuals doesn't mean that it's not illegal market manipulation.
The loophole here is that all new Robinhood accounts are margin accounts by default. You have to go through a process to switch from a margin account to a cash account and I suspect 95% of Robinhood's customers have no idea what the difference is or why they'd ever want to do that.
So Robinhood technically is allowed to do this as per the letter of the law, and now the question is whether Robinhood is violating any fiduciary duties they have to their customers.
But how many of the accounts have larger positions in GME than equity? It doesn't make sense to margin call or liquidate someone who is good for the whole amount. Also if someone has some leverage it's not reasonable to liquidate them completely.
This is exactly why people should be outraged. The type of risk that requires a margin call isn't present by just holding long positions in a security. Unless you are trading options or selling short, your equity is equal to your positions, and no margin call should be necessary.
They are literally using the margin call mechanic to force closures in positions that have no risk.
An unsettled ACH withdrawal that you initiated does not cause massive risk. It's a two-day float. There's no way to undo an ACH transfer; it's guaranteed funds. Even if you lose all of it, it doesn't matter, since they'll be paid back once the check clears.
I am in total agreement with you, this is outrageous. I'm only speculating as to what I believe Robinhood's position is, which is that these accounts are technically margin accounts and so Robinhood has the right to liquidate them as per the account "agreement".
https://news.ycombinator.com/item?id=25947674
From the number of Playstore votes it seems quite a few?
Will be interesting to see if it stays that way. Or if they can somehow cheat their way out of it and get all recent ratings deleted or something.
Any guesses?