“This is unacceptable,” Rep. AOC comes out against Robinhood’s decision to block Gamestop, AMC traders
Ignited by Redditors, money moves by retail investors may mark a shift in financial history.
The fallout from Robinhood’s interference in allowing its users to trade freely will likely come with legal consequences.
The online trading platform has moved to restrict trading in GameStop, AMC, and other stocks that have soared due to aggressive buying by smaller retail investors, and many novices whose attention was peaked in Reddit threads.
GameStop’s stock has soared from below $20 earlier this January to more than $400 on the morning of Jan. 28 as an army of investors from Reddit, Discord, and Twitter went on a crusade to challenge Wall Street, big institutions, and hedge funds that had placed market bets that the stock would soon fall.
Amid the frenzy, Robinhood released a statement that trading in stocks like AMC, Bed Bath & Beyond, Blackberry, Nokia, Express, and more would be affected by new restrictions.
The app ventured to explain the move in a blog post Thursday morning, just before the market opened.
"In light of recent volatility, we are restricting transactions for certain securities to position closing only,” it said.
Small investors didn’t stop, sending the price to soar higher, they forced the big players to cover their bets by buying the stock, increasing the price even further.
Since then, #HoldTheLine has become a movement, with multiple users across the aforementioned platforms saying they won’t sell, or are waiting for the market to close at the end of the week.
But Robinhood’s interference could seriously hurt users.
Redditors are currently panicking and looking for ways to transfer their shares of GameStop off of Robinhood to other platforms, and are generally furious at the platform — some even sending a barrage of one-star reviews on the App Store.
“This is likely to have a massive impact on Robinhood users and ultimately the company. Holders are now unable to freely trade it; the app is only allowing users to close out their positions, meaning they can sell it but not buy more,” reported Vice.
Robinhood’s actions have been further criticized by both users and politicians alike, especially after reports that more than half of all Robinhood users own at least some GameStop stock. They are now unable to freely trade it, and Robinhood is only allowing users to close out their positions.
“This is unacceptable,” wrote Rep. AOC, who holds an Economics degree from Boston University.
“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,” she continued.
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
AOC’s committee oversees all components of U.S. housing and financial service sectors including insurance, real estate, public and assisted housing and securities — and banking.
The congresswoman went on to say that committee investigators should examine any retail services freezing stock purchases in the course of investigations, "especially those allowing sales, but freezing purchases," referring to similar actions taken by the app Webull.
Rep. AOC was joined by Rep. Rashida Tlaib (D-MI), also part of the 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,” she wrote.
California Rep. Ro Khanna also called for an investigation into the interference of Robinhood, backing AOC’s statement.
“Yes @aoc. We need an investigation into RobinhoodApp’s decision and who influenced that. And this shows the need for a financial transaction tax on hedge fund shorting and SEC regulations on short selling practices.”
The market conditions are unprecedented, but regulators have tried to justify the trading halt by saying it was used to protect investors from the “volatility” or “manipulation.”
However as Congress members and Twitter users have noted, they really serve to protect the big markets and hedge funds, and not the casual users of the app, who are subject to the most losses.