Corporate benevolence has never looked so sweet. After first preventing its users from purchasing GameStop stock on Thursday, the free-trading app Robinhood reversed course. On Friday, in its ultimate wisdom and generosity, Robinhood decided to limit the number of GameStop stocks its users could purchase to one. So noted the company in a blog post, which was quick to emphasize that "these are aggregate limits for each security and not per-order limits, and include shares and options contracts that you already hold." Robinhood just announced it's limiting people to 1 stock on GME, AMC & other heavily shorted stocks.
Key players in the GameStop saga faced questions Thursday from House lawmakers concerned that even as investing becomes more democratized the scales are still tilted in favor of the big Wall Street institutions. Among those on the hot seat was GameStop enthusiast Keith Gill, known for the videos he launched under the name "Roaring Kitty" boosting the stock. "The idea that I used social media to promote GameStop stock to unwitting investors and influence the market is preposterous," Gill told lawmakers. "My posts did not cause the movement of billions of dollars into GameStop shares." But Gill, who lives outside Boston, did acknowledge that some investors jumped in too late.
Early on the morning of January 19th, Cody Herdman woke to the vibration of his smartphone alarm under his pillow. He immediately checked the finance app Robinhood for the trading price of a company called GameStop. Herdman, who is nineteen, is a freshman computer-science major at Dakota State University, where until recently he played center for the Dakota State Trojans football team, and he had been investing in the stock market for a month. Robinhood, which offers zero-commission trading in stocks and cryptocurrencies, pitches itself as an enlightened version of Wall Street; its stated mission is to "democratize finance for all." Herdman's friend Chase Bradshaw had introduced him to trading on the app, which now consumed much of the time that he used to spend playing video games.
Robinhood can now add a class action lawsuit to its growing list of headaches after it said it would restrict users from trading GameStop and other stocks. A class action lawsuit was filed in New York Thursday, alleging that Robinhood "deprived their customers of the ability to use their service," in an effort "to manipulate the market for the benefit of people and financial intuitions." The lawsuit comes hours after Robinhood informed users that it would restrict a handful of stocks, including GameStop, Blackberry, AMC, and American Airlines, due to "recent volatility." The company also said it would raise margin requirements for some securities. "We continuously monitor the markets and make changes where necessary," Robinhood said.
Many startup founders dream of the day their creation claims the top spot in Apple Inc.'s app store. For Vlad Tenev, Robinhood Markets Inc.'s chief executive, it was more like a nightmare. Mr. Tenev and his co-founder, Baiju Bhatt, had set out eight years earlier to bring the stock market to a new class of investors. With engineers plucked from Facebook Inc. and other tech giants, they stripped down the trading experience and eliminated commissions, making buying a share of stock about as easy as posting a photo on Instagram. During the pandemic, throngs of amateur investors--homebound, bored and flush with stimulus checks--opened Robinhood accounts to experience the market's thrills.