July 29 marks the one-year anniversary of Robinhood’s IPO
To: Interested parties
From: Dennis Kelleher, Co-Founder, President & CEO
(Media Contact: Anton Becker, Director of Communications [email protected])
Date: July 26, 2022
Subject: July 29e mark it First anniversary of Robinhood’s IPO
A year ago on Friday July 29e, financial firm Robinhood went public at $38 a share. Today, the stock is hovering around $9 per share. Over the past year, Robinhood has lost 10% of its monthly users and laid off 9% of its employees. Robinhood retail traders did even worse, especially during the Gametop Frenzy of 2021.
Of course, it wasn’t supposed to be like that. Robinhood claimed it would “democratize Wall Street” by providing easy access to stock market wealth and cheaper or even free financial products and services. While Wall Street and finance more generally can and should be democratized, Robinhood’s model based on maximizing frequent high-risk trading, incentivized by predatory gamified apps to generate as much order flow payment (PFOF) as possible, is not how. These are exploitative practices that often enrich Wall Street at the expense of those least able to bear the losses.
Robinhood’s IPO anniversary is also a time to look back to January 2021, when a trading frenzy erupted in the stock market around so-called “meme stocks” like GameStop. In just 16 days, GameStop’s stock price rose 1600% for no apparent reason. The trading frenzy was fueled by new retail traders speaking out on Reddit subforums like w/wallstreetbets, many of whom were determined to harm hedge funds by shorting meme stocks. (They partially succeeded.)
Most of these retail meme stock traders and editors were using apps like Robinhood, until the app suddenly prohibits certain transactionssuch as buy orders on stocks like GameStop and similar similar stocks, effectively helping Wall Street hedge funds short the stock, but hurting retail traders and Main Street investors.
The bottom line: Stock markets and finance can be democratized without the exploitation and manipulation we saw with Robinhood. Better Markets has been following these questions closely and has produced a myriad of resources on Robinhood, gamification, order flow payment, short selling and more. As Robinhood’s IPO anniversary approaches, it’s important to remember the highlights and the weak points of this company, the false promises and the damage it has caused.
A sample of The work of Better Markets on Robinhood is below:
- Dennis Kelleher live interview on CNBC: “Retail boom and bust? Robinhood SEC Review”
- Law review article (July 2022): “Democratize stock markets with and without exploitation: Robinhood, GameStop, hedge funds, gamification, high frequency trading, etc. »
- Dennis Kelleher made a Reddit AMA video with Superstonk to discuss the frenzy, lingering questions about Robinhood, and how the community can get involved to bring about change. You can watch the AMA here.
- Factsheet on the main issues raised by Robinhood, Reddit, Citadel, GameStop and rigged markets.
- Testimony of Dennis Kelleher before the House Financial Services Committee on the Robinhood Saga, GameStop