Counterpoint: You are assuming good faith behavior in RH, where I see blatant fraud. It is outright market manipulation that they stop people from buying, but not selling. That they stopped individuals like me, who know the risk and can afford the loss, while allowing their hedge fund buddies to buy the dump and cover shorts.
As for "this would have happened anyway", well that doesn't sound very free market to force the very thing you claim to be trying to stop. RH says "oh no we don't want you to lose money, so we're going to cause a crash on the stock. Feel free to sell".
Good thing people can still buy on RH, in order to close their short positions, because guess what? They restricted opening of new positions, meaning that if you have no position, you cannot buy or sell. It is common, it is normal, several other brokerages took similar actions, and it is commonly done when it looks like something illegal might be happening.
From what I understand, they are allowing selling shares, just restricting purchasing shares. That is what makes this market manipulation. A market freeze would block all transactions.
They are allowing people to close positions they currently hold, but not open new positions. That is not the same as only allowing people to sell shares, and it is not the same as suspending trading of the security.
> "close positions they currently hold, but not open new positions. That is not the same as only allowing people to sell shares"
Since RH doesn't allow shorting, the only way to close a position is by selling shares. So yes, it is exactly the same as only allowing people to sell shares.
If you know the risk, and can afford the loss, you can use a different platform, no?
This action is likely (at least partially) targeted to prevent new users who have never traded a stock from trying to hop on the train and follow a "How to buy GME Options to make BANK in 5 simple steps!" article from losing everything.
Do you think there would be less blow-back if Robinhood only restricted new accounts? Or maybe only people with minimum balances?
If they stopped allowing people to sell their existing positions, then a lawsuit about "Robinhood is holding my funds hostage, didn't let me sell, and now I lost money because of them" would have come in, and probably would have had a lot more merit.
Yes, I am 100% assuming that Robinhood is acting is "good faith" (the fact that I'm defending Robinhood feels gross to me).
If Robinhood just wanted to make money, they would have let this continue. People like to complain that RH gets payment for order flow, but they just knowingly cut off that order flow.
It feels like Occam's Razor should apply here. Either:
1. Robinhood felt that it's long term prospects were better if it's users weren't able to gamble and most likely lose all of their money, thus being scared away from the stock market forever.
2. There is a secret cobal that Robinhood, who was previous the "bad guy" of the financial world, is now in and tricked it's users into buying a stock that would be worthless just so that Robinhood could shut of trading at the peak, and let their secret hedge-fund buddies make a ton of money.
I'm not inclined to believe the conspiracy theory when there is a more more reasonable option.
The same firm, Citadel, that fills much of RH's orders is the firm that propped up Melvin Capital (the group that shorted GME and needed a bailout).
Option 3: The cabal is there, it isn't secret, and they were on the hook to lose so much money that it was cheaper to essentially sacrifice the RH brand than to let the short get fucked to infinity.
Edit: They have stated on a blog post that this was a risk management move on their part - not strictly in the interest of the customer.
> I believe they are committing fraud and stock manipulation.
The stock is already manipulated, though. No one racing to buy GME is doing so because a genuine desire to receive dividends, exercise voting power over corporate governance, etc... They're doing it because they read on wallstreetbets that a magical "short call" was coming tomorrow which would spike the stock.
That's a SCAM. It's not going to happen that way. The owners of all those early shorts have already settled their positions (and, yes, lost a lot of money in the process) and all you're seeing now is a tulip-style pump and dump.
You got scammed. You're not a hero. Robinhood might well not be acting in your best interests but they almost certainly saved you money.
The users on WSB used publicly available data to see that the shorting was occurring. They did what "the pros" constantly do, which is pool resources and make moves collectively. That is not "manipulation" in the legal form of the word. Not like shutting down trading, in one direction only, for retail only.
Since it is individual users on a public forum winning, instead of the guild of hedge fund bros, the power player (Citadel) is forcing the shutdown.
Whether or not pumped up stocks are wise is irrelevant. The fact that something that happens constantly gets axed because the wrong people are winning is the issue.
As for "this would have happened anyway", well that doesn't sound very free market to force the very thing you claim to be trying to stop. RH says "oh no we don't want you to lose money, so we're going to cause a crash on the stock. Feel free to sell".
It's rotten to the core.