GameStop Blunder Aftermath

Robinhood has halted its users from buying GameStop and other “meme stocks.” Traders and US lawmakers are now screaming “market manipulation.”

Favorite millennial trading app Robinhood has been hit by several customer lawsuits after restrictions placed on GameStop (GME) stock trading.

The lawsuits, filed in Manhattan and Chicago, followed a hectic few days for the app and the failing video game retailer. GameStop’s stock price surged over 400% this week, as Reddit users on the r/wallstreetbets message board launched a harmonized effort to squeeze short-sellers.

Another hedge fund, Melvin Capital, received an almost $3B bailout from two other hedge funds after closing out its GameStop shorts. Robinhood has blocked customers from purchasing more GameStop stock early today, which sent the price to over $400 a share, and smashed it shortly after.

Lol Robinhood Google reviews down to 1 star. What a way to kill a brand overnight. pic.twitter.com/iYQxL4yGlb

— Dr. Parik Patel, BA, CFA, ACCA Esq. 💸 (@ParikPatelCFA) January 28, 2021

The Manhattan lawsuit alleged that “Robinhood purposefully, willfully, and knowingly removing the stock ‘GME’ from its trading platform amid an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market and manipulating [sic] the open-market.”

Rep. Rashida Tlaib invoked Robinhood’s actions as “market manipulation” in a tweet and then called for a hearing with the House Financial Services Committee.

This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades. https://t.co/CGkJxVfzkv

— Rashida Tlaib (@RashidaTlaib) January 28, 2021

Rep. Alexandria Ocasio-Cortez concurred, writing, “We now need to know more about @RobinhoodApp‘s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”

This is unacceptable.

We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.

As a member of the Financial Services Cmte, I’d support a hearing if necessary. https://t.co/4Qyrolgzyt

— Alexandria Ocasio-Cortez (@AOC) January 28, 2021

Even Sen. Ted Cruz looks like echoing the progressive lawmakers’ concerns:

Fully agree. 👇 https://t.co/rW38zfLYGh

— Ted Cruz (@tedcruz) January 28, 2021

Since its launch in 2015, Robinhood had been among the buzziest startups at the intersection of finance and tech. Beyond the stocks, the app also allowed its users to buy and sell cryptocurrencies, involving Bitcoin, Ethereum, and Dogecoin.

The company also has plans to go public this year in one of the most anticipated IPOs of 2021 – at an estimated valuation of around $20B. It is still unclear what the GameStop situation and its users’ response may mean for those plans.

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