Why Robinhood Restricted Trades on GME

Robinhood is an app that provides the means retail traders need to invest in the stock market. On their social media platforms, they boast that they are “democratizing finance for all,” and they intend for their app to be seen as an alleyway to the world of stocks that anyone can use, professional or not. With the recent spikes of GME and AMC, many have accused Robinhood of abandoning this vision for their app. In response to “current market volatility,” Robinhood’s twitter account announced that they had frozen trades of these two stocks which had recently skyrocketed, preventing people from buying these stocks, and the company has been alleged with market manipulation. Many people are questioning Robinhood’s motives behind this move. It is known that the rise of GMC and AMC stock values have occurred from a reddit server that had caught on to a hedge fund’s plan to short squeeze the stock. Instead of the stock value going down, hundreds of thousands of people on this reddit server purchased GME and AMC and drove the price upward. The hedge fund, who still needed the same amount of shares, were forced to buy the stocks again, this time at prices 300% higher than when they sold, causing it to lose billions of dollars. 

Many people have called this occurrence an attack on wall street’s stock manipulation, and that description of it isn’t completely inaccurate. It is people defeating full time stock investors at their own game. Something that has caught the attention of many people is Robinhood’s IPO, which is scheduled to be made available in the next couple months. Since Wall Street itself is usually the sole determiner of the direction an IPO’s value goes, many people have accused that Robinhood banned these trades in efforts to collaborate with Wall Street as much as possible, and in turn, have a successful IPO. This has infuriated many of its users, who plan to delete their accounts as soon as they withdraw their money from them.  Regardless, this action has tainted Robinhood’s reputation for their service, and it is likely that their stock  price, regardless of cooperation with Wall Street, will not be successful.