Decision to Halt GME Trading Compromises Robinhood
The drama surrounding GME rages on, attracting many eyes, even from outside financial circles. Robinhood’s decision to halt GME purchases on Thursday triggered a mass sell-off and landed the broker in hot water.
Currently, it’s faced with two significant threats. Customers are dissatisfied and accusing the app of market manipulation, with many planning to leave the broker. On the other hand, lawmakers are also inquiring into the reasoning behind the buying shutdown. It’s important to note that selling wasn’t forbidden, further fueling the fire behind the manipulation accusations.
Besides the trading halt, The New York Times and Bloomberg reported that the broker raised $1 billion from investors. Not only that, but it’s drawn additional funds from credit lines, with numbers as high as several hundreds of millions. Bloomberg TV and CNBC interviewed the broker’s CEO, Vladimir Tenev, as the situation was transpiring.
Mr. Tenev pointed towards financial requirements as the reason behind the fundraising and trading restrictions. The company stated that the decision was not affected by market makers or intended to manipulate the market. The statement did little to resolve the situation, as traders’ attitudes towards the broker remain quite negative post-restriction. Reddit.com’s WallStreetBets subreddit users seem to be among the most dissatisfied with the decision.
However, regular traders weren’t the only ones to deem the decision unfair, as lawmakers chimed in. From both sides of the US’ political spectrum, Robinhoods decisions faced harsh criticism, which may result in investigations. New York’s Rep. Alexandria Ocasio-Cortez and Texas’ Sen. Ted Cruz were among the first to vocalize their thoughts against the restriction. Rep. Maxine Waters and Sen. Sherrod Brown, democrats hailing from California and Ohio, respectively, have both announced stock market-related hearings.
The app was quick to backtrack its decision to halt trading and issued an apology. However, the restriction resulted in a panic on Thursday, tanking the stock price to a low of $126.
