Robinhood was founded in 2013 and it revolutionized the art of trading. It gave small investors the ability to buy and sell stocks.
The Robinhood-GameStop stock market frenzy took Wall Street by storm a couple of weeks ago.
So What Really Happened?
Effectively, the r/WallStreetBets crowd realized Wall Street made a huge mistake. People known as short-sellers who were betting GameStop stock would fall had been too aggressive.
The r/WallStreetBets crowd understood that if they could create artificial demand for GameStop shares with their own money, they could force Wall Street to recalibrate its bets, pushing prices even higher. And some investors who couldn't even back up their bets against GameStop, would have to pay even more.
According to CNET, as a result of this, shares of the struggling video game retailer skyrocketed by more than 14,300% before dropping down to a little over $100.
During the surge, extremely well-funded financial firms who were betting against GameStop’s stock ended up losing BILLIONS of dollars and caused Robinhood to become the centre of controversy when they were accused of mass-market manipulation after they restricted the trading of GameStop and other stocks from retail investors on their platform.
In their defence, Robinhood stated that market rules forced it to put those restrictions into place. However, this statement wasn't enough for the angry investors as they believe they were treated unfairly.
The New York Times writes, ''In the regulatory filing, Robinhood disclosed that it is facing at least “46 putative class actions and three individual actions” over the trading restrictions.''
Sounds to me that Robinhood is in big trouble, but could this be the end of Robinhood? Let's watch and see what happens.
Sources:-
https://www.nytimes.com/2021/02/26/business/robinhood-gamestop.html
https://www.cnet.com/personal-finance/gamestop-stock-crashed-but-reddit-still-wants-to-send-it-to-the-moon-how-and-whats-next/
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