How Robinhood Went From Hero to Villain in 48 Hours
The trading app saved the hedge funds and threw its users overboard — jeopardizing its entire business
For a year or two Robinhood has been, well, a Robin Hood — a no-fee savior to little guy investors everywhere, who got on the platform, yakked it up with fellow little guys in online chat rooms and Discord servers, and collectively, day after day, drove up the price of a palette of stocks. Last May and June, I joined in the fun when the Robinhood guys drove up the price of Avis. No one stepped in, Avis’ share price eventually plunged, and folks moved on to another stock. That was enough for me, but I admired the gumption and persistence of those who stuck with it.
Alas, it seemed predictable that killjoys would step in, but the institution demanding the lights turned off stung: Robinhood, which summarily ordered a halt to the sale of GameStop options.
Yet, nothing could have prepared the little guys for the most fun any of them — not to mention us voyeurs standing on the sideline — had probably experienced in their lives: the 17-fold inflation of shares of GameStop, the has-been video game retailer, over the last two weeks. On Tuesday in Marker, James Surowiecki explained the significance lurking behind this “meme stock” boom: “Even though GameStop’s current stock price is utterly irrational…the way Redditors and others have driven its price up has been quite smart.” With his earnings, one Reddit user who goes by the name “Longjumping” posted in the community WallStreetBets that he paid off more than $23,000 in student loans. In a ton of videos about the feat, TikTokers celebrated the suffering inflicted on self-impressed, over-inflated, fat-cat hedge fund traders who had shorted GameStop.
The GameStop Fiasco Proves We’re in a ‘Meme Stock’ Bubble
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Alas, it seemed predictable that killjoys would step in, but the institution demanding the lights turned off stung…