I’ve been a fan and customer of Robinhood since 2015. That ended today.
1/29/2021 update: to make things clearer, I’ll be splitting this piece into two. This one will be my opinion of Robinhood as a customer, and I will do a separate, neutral piece about GameStop and the movement behind it.
My first stock was a share of Intel I bought with my work study money at school.
$30.79.
If I had used any other broker, they’d have charged me $6.99 commission.
But Robinhood didn’t. They offered commission free trading. A beautiful mobile app. They simplified and democratized investing so that ordinary people could invest in the success of public companies. Could grow as our economy grows.
I was on that Robinhood waitlist for months until I finally got off. I was Customer #148,088. I was.
That all changed today.
With no warning, Robinhood—and other brokers—decided to lock investors out from investing. GameStop, AMC Movie Theaters, American Airlines. Too many ordinary people were finding too much success in these companies. Hedge funds who had bet big on these companies going bankrupt were hurting. And so with no explanation other than protecting customers from a “volatile market”, Robinhood locked their own customers out.
It’s as if your bank took away the transfer button on a whim. Cue panic.
GameStop collapsed from almost $500 to $100 in an hour crippling ordinary investors. On the other side, the hedge funds began raking it in. 2008 all over again.
One of my friends pointed out that the big mistake and abuse Robinhood made here is that they took a stance.
Your broker should be neutral. You ask them to buy some Apple, they buy some Apple. You ask them to sell some Apple, they sell some Apple.
People can lose and make money on the stock market. Normally, they (or at least I) do that to themselves.
Their patience, their diligence, their research or lack thereof. Their choice between diversified index funds, predatory high fee active funds, or individual stocks of companies they believe in.
But that didn’t happen today. Robinhood and other brokers took a stance. They said, hey we don’t think you actually want to do that. And that’s exactly where they crossed the line.
There’s certainly a lot going on behind the scenes, which I’ll expand on in a separate post.
If I were to give Robinhood full benefit of the doubt, there could have been no bad actors and simply not enough stock in stock. Their clearing house almost sold out. But that’s not what they said and still have not said.
If I were to connect the dots between their relationship to Citadel, we’d see Citadel the market maker as Robinhood’s key revenue source. We’d see Citadel the hedge fund directly vested in huge bets against Gamestop. I’d cry conflict of interest.
As we’ve seen with Facebook and other social media, if the product is free, you’re the product.
Either way, Robinhood gave no warning, no clear explanation and like 2008, the victims were once again the ordinary investor.
Today Robinhood had a choice. Their customers. Or the hedge funds. They made their choice, and I made mine.
Goodbye, Robinhood.
—Sincerely, Customer #148,088
As an appendix, I wanted to list both reputable brokerages that continued to serve their customers’ best interests as well as those that did not. This is a growing list which I will update:
Reputable brokerages:
- Fidelity Investments
- Vanguard
Banned trades in GameStop, AMC, etc. at some point:
- Robinhood
- E*Trade
- Interactive Brokers
- TD Ameritrade
- eToro
