The stock market has definitely faced a lot of difficulties and caused a lot of controversy in the past few weeks. It tends to do that on any normal day, but this time, it was different. The subreddit r/WallStreetBets got together and, through a series of events that involve buying an excessive amount of stock and refusing to trade said stock, ended up skyrocketing the GameStop stock price to an impossible height.
That, in itself, is enough to talk about for hours. Never before have normal, working-class investors (called “retail” investors by the media) managed to pull something like that off. Right now, though, focusing on the apps that allow stock trading themselves is just as interesting. There are a few apps and websites that allow the “average” person to trade stocks, and the one that managed to garner the most controversy during the entire GameStop debacle was a trader app called “Robinhood.”
The Robinhood app has come under extreme fire due to its presumed meddling with people’s ability to buy stocks. As GameStop’s stock (called $GME) price soared to new heights, coming in at around $483 per share at one point, the app ended up prohibiting the stock from being purchased. It was stated on the app itself that due to “volatility of the stock price,” it was unable to be purchased at that time. Various other apps followed this trend as well, Cashapp and Webull being two examples (though Webull later allowed $GME to be purchased again). Robinhood caught the most flak, though, as they were the first to do this.
This enraged retail investors, as the goal was to push the $GME stock even higher in hopes of forcing the hedge funds (large Wall Street investor groups) to re-buy the stock back at exorbitant rates, thus essentially forcing wealthy Wall Street investors to give them ludicrous amounts of money. It’s a good idea, and with the unique circumstances surrounding the $GME stock, it would have worked!
However, by Robinhood, the app that a majority of retail investors were trading on, preventing trading of the $GME stock, it ended up reducing the price of the stock by a large margin. Supply and demand was the reason it was gaining traction in the first place, and preventing the ability to trade artificially reduced demand, thus cheapening the price of the stock.
Retail investors began (rightfully) review-bombing the app on sites, plummeting the app rating down significantly lower than it had been initially. They also began flocking to other sites, but transferring trading accounts to different apps can take upwards of a few days, and the retail investors risked losing traction that way.
Robinhood’s reputation suffered immensely, facing backlash on both social media and in the courts. There are currently multiple class-action lawsuits underway, as retail investors are enraged at the way they were denied access to trading. There is even a new subreddit titled r/ClassActionRobinHood, where people are gathering in order to discuss the logistics of opening and participating in the ongoing lawsuits. The app’s user base is also dwindling, as it has lost the trust of the people who are using it. A large portion of users are migrating to Webull, Fidelity and other miscellaneous trading apps in order to protest their anger at the company.
All in all, this was an entire mess of a situation, and Robinhood’s reputation as one of the best stock trading apps available ended up tanking. Many people are quick to point out the irony of an app using the name “Robinhood” manipulating the ability for average retail investors to purchase stocks, and the app is still being lambasted on every social media account they own. It’s kind of a sad ending, but it feels justified. The Robinhood app’s rating has plummeted just like the $GME stock price again, and it feels like an even trade overall.