Popular trading platform reverses decisions following public scrutiny
MENLO PARK – The popular online trading platform, Robinhood, announced Friday the easing of restrictions on the trade of GameStop and several other contentious securities – while continuing to disallow fraction share purchase – a day after trying to halt their trading entirely.
On Thursday, Robinhood made the decision to unlisted certain companies that have been the subject of a coordinated demand surge, causing an intense backlash.
Robinhood came under scrutiny from politicians, regulators, and users; with many voicing their opinions on social media and online forums. Frustrated users also review-bombed the apps’ Google and Apple listing, resulting in Google cancelling around 100,000 recent 1-star recent reviews as per its policies of preventing external news or events from affecting an app’s rating.
The underperforming company, GameStop, shot to fame several weeks ago by users of the popular online forum Reddit. A popular poster, Keith Gill (aka ‘DeepF—ingValue’ and ‘Roaring Kitty’ on Youtube) on the now infamous subreddit WallStreetBets, rallied for purchase of the stock by pointing out the fact that GameStop was heavily shorted by several hedge funds at 140%. As many answered his call, share prices shot up dramatically to approximately 2000% at one point. With the success of GameStop, users turned their attention to several other highly shorted stocks including Blackberry (BB), Macy’s (M), AMC (AMC) and Nokia (NOK).
The movement gained further traction with support from influencers like Chamath Palihapitiya and Elon Musk.
As trading platforms continue to monitor and limit buys, some are beginning to see the negative long-term effects of the incident. The democratisation of securities trading has been fuelled in recent years by the disbursement of free advice on forums such as Reddit and zero or low fee apps like Robinhood. This, in turn, has given large groups of retail investors the ability to manipulate the market to their advantage against traditional investors and exposing a major flaw in the system. Stock markets posted their worse results since October, with the DOW finishing 2% lower end of day Friday. Meanwhile, hedge fund owners who found themselves on the receiving end of the ‘retribution’ lost close to $19 Billion in GameStop alone, and billions more on other securities.