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Businesses The Almighty Buck

Robinhood Screwed Its Users But Is More Popular Than Ever (vice.com) 60

Posted by BeauHD from the any-publicity-is-good-publicity dept.
An anonymous reader quotes a report from Motherboard: Robinhood is seemingly still very popular. According to The New York Times, Thursday -- the day of Robinhood's strictest trading restrictions -- was also its best ever: it saw over 177,000 downloads (twice the previous week's daily rate) and had 2.7 million daily users. Robinhood also announced on Monday that it raised another $2.4 billion in a new funding round led by Ribbit Capital and including existing investors such as ICONIQ Capital, Andreessen Horowitz, Sequoia Capital, Index Ventures, and NEA. Bloomberg reported that the investment would convert into equity at a $30 billion valuation or a 30 percent discount on its initial public offering (IPO), and then would be followed by another $1 billion infusion converting to equity at either a $33 billion or a 30 percent IPO discount. Robinhood has been planning to go public in May since late last year, either through an initial public listing, a direct listing, or a merger with a SPAC.

The truth is that Robinhood has momentum, a hooked user base, and a business model that seems empowering for users but rather exploits them. In an interview with The Wall Street Journal, Robinhood's senior director of product management Madhu Muthukumar said that the app's gambling-adjacent interface is intentional and designed to "make it feel like something that's familiar to populations that historically have not been served." And for all the rhetoric around "democratizing" finance, Robinhood sells all its users' trades to huge firms such as Citadel Securities which sees them before they are even executed on the market. Indeed, the SEC fined Robinhood $65 million recently for losing investors tens of millions of dollars due to its business dealings with market makers.

As Jacob Silverman writes in The New Republic, the troubles it's facing now are unlikely to halt Robinhood's advance. In a time of rampant poverty, precarity, and also absurd wealth, we are heading towards becoming a nation of gamblers hoping to strike it rich. That Robinhood's siren call is more popular than ever should be read as a omen -- the app is simply bringing more people to a casino when they have less to gamble with. And in a casino, the house always wins.
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Robinhood Screwed Its Users But Is More Popular Than Ever More

Robinhood Screwed Its Users But Is More Popular Than Ever

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  • Downloading it just to downvote (Score:5, Insightful)

    by CastrTroy ( 595695 ) on Tuesday February 02, 2021 @05:56PM (#61021080)

    How many people downloaded it just to make themselves look like real users so their ratings wouldn't be removed?

    • Very very few people give shits about things they don't use to go to that extent. The reality is people were FOMOing into day trading and the RobbinHood app had been in the news, so they start there.

    • Re: (Score:3)

      by AmiMoJo ( 196126 )

      In fact you have to download it to leave a review on Google. It's a bit annoying because you have to remember to review crapware before uninstalling it.

  • Puff Piece - Completely detached from Reality (Score:4, Insightful)

    by gwills ( 3593013 ) on Tuesday February 02, 2021 @05:58PM (#61021090)
    Robinhood is about to get sued into oblivions. Their users are figuring out they were the product all along and have other options. The masses are tired of being cheated and screwed by fintech.

    • Re: (Score:3)

      by gwills ( 3593013 )
      Google had to remove 100k 1 star ratings, how is Motherboard even able to write this with a straight face
    • Robin hood didnt do anything illegal or or that others werent doing. At the very worst, robbin hood just did poor business.

      • Re: Puff Piece - Completely detached from Reality (Score:4, Insightful)

        by dpille ( 547949 ) on Tuesday February 02, 2021 @06:51PM (#61021334)
        It doesn't have to be illegal to result in liability. It's not illegal to breach a contract, for instance.

        • You have a strange definition of illegal. To the rest of us, it means "against the law". Breaching a contract is, of course, illegal.

          • No. It is not illegal to, for example, not make a monthly credit card payment (which violates the contract you signed with the credit card company). The company can, in turn, do various things (including sue you in civil court), but it can't have the local police arrest you.

            • Illegal != criminal.
              Breach of contract is a violation of the law. If it weren't, a lawsuit would accomplish nothing.

      • The crazy thing is, Robinhood probably did it's users a favor by stopping buys at that point... anybody getting in that late in the game was going to lose their shirt just as bad as the shorts did. What the hell ever happened to buy low sell high. Sure it's possible they could have driven the price up more, but most short positions had been closed or covered by that time.

        • Not really, had they sold right as the shorts started clearing they would have lost a minor amount at most, and selling when the shorts came due was ALWAYS they strategy posted by WSB. But between the stoppage by RH et al and internal selling game the hedge fundies played, the price dropped from over 500 to under 300 well before the shorts started clearing en masse.

    • The masses are tired of being cheated and screwed by fintech.

      You give them too much credit.

    • They aren't going to be successfully sued for shit. Read their ToS - you and your fellow Very Onliners don't have a fucking leg to stand on.
      • Did you read it? Did you get to the part where they require you to certify you're a human or a cat?

        "We put that in there to be funny." Oh, says the class action lawyer, how were users to tell which provisions weren't a joke?

        • Doesn't matter if it's a joke. You might have some point if they said e.g. "also we get your first born if you go below margin unless you can guess our HR head's cat's name (hint it rhymes with Pumplestilskin teehee)". Clearly not real and unenforceable etc...

          In this case, they can certainly enforce you not being a cat. Silly, sure, but enforceable. That being in there invalidates nothing.

          • Thank you, next time I need a contract lawyer, I'll be sure to ask someone else.

            See, for instance, Graham v. Scissor-Tail, Inc., 623 P.2d 165, (Cal. 1981), where factors to finding unconscionability and thus unenforceability include 'contract phrasing or language that a non-lawyer signer would not understand' and 'contract provisions that are inconsistent with the signing partyâ(TM)s reasonable expectations.' Do non-lawyers understand why cats appear in the TOS, and do they reasonably expect that RH o

    • Re: (Score:3)

      by Gimric ( 110667 )

      Robinhood will explain that they couldn't meet the deposit requirements of their brokers, and restricted share purchases in line with their user agreements, and nothing further will happen to them.

      • They better hope there aren't any emails that may be found in discovery that show influence by outside sources. If they do, the TOS is irrelevant.
    • Comment removed based on user account deletion

  • But Google removed the 1 star ratings (Score:3, Informative)

    by BanHammer ( 5567450 ) on Tuesday February 02, 2021 @06:07PM (#61021128)
    So its artificial,and Robinhood should be investigated

    • Don't worry, its average rating is back down to 1.1. I'd imagine a lot of people will think twice about downloading an app rated like that.

  • The real question is how many ACAT's (Score:5, Insightful)

    by SirSpanksALot ( 7630868 ) on Tuesday February 02, 2021 @06:10PM (#61021152)
    The real number you want is how many ACAT's were initiated on Thursday. I initiated my ACAT Thursday morning as soon as I learned of the restriction - That pulled out 120k of assets where I was frequently trading large numbers of option spreads (read: lots backend order flow money for RH). I know that there are lots of people doing the same, and I've been encouraging everyone I know that uses RH to move out as quickly as possible so they don't get caught in a issue when RH's liquidity goes tits up if they declare bankruptcy from this.

    • Re: (Score:2)

      by gwills ( 3593013 )
      good man!
    • I've been using RH or a year and a half just for play-investing. TD Ameritrade is where my Roth is held. I am now moving everything over to TDA after the GME debacle. Robinhood dropped the ball too royally on this one, and I'm not even part of the GME party. I just don't like the fact that they arbitrarily turned off buying of GME but not selling. Like what the actual fuck? Then to come back with a super lame PR excuse, when the real reason was really likely that they were about to run afoul of not ha
      • Since I do a lot of options trading, I switched over to TastyWorks - They have by far the best tools for options investing, and options trades are capped at $10/leg to open $0 to close which is the cheapest of the non-free brokers when doing volume.
      • I know a several people who moved (or are moving) their accounts after this debacle. They haven't all be to TD Ameritrade, some of them moved to Fidelity, or other places, because they found out the place holding their (other account like HSA, 401k, et al.) ranks up there for features and whatnot, and they didn't really have to open anything.

        The thing that should scare RH is that these people moving accounts weren't involved in buying GME (or other /WSB items) but most didn't like the fact that RH limite

  • How many of you had even heard of Robinhood before this GME debacle? I hadn't. I didn't even know there were zero-commission brokers around (though the technically commission-charging broker I've been using for years gives me so many free transactions per month that I never actually pay any commissions). I'm now curious about Robinhood, and if I were looking for a brokerage I might well give them a try.

    Bottom line, this GME thing, Robinhood's actions around it, and the furor over those actions have made

    • Re: (Score:3)

      by gwills ( 3593013 )
      Lol, this is the first time you've heard about RH complaints? For someone admitting their ignorance at the beginning, you should be more careful about your conclusions. Robinhood is literally stealing from their users at the benefit of hedgefunds, addings MILLIONS of new WSB memebers and somehow you think people are going to give RH goodwill? What a horrible take.

      • Lol, this is the first time you've heard about RH complaints?

        Reading comprehension not your strong suit? I said that this was the first time I'd heard of Robinhood at all.

        For someone admitting their ignorance at the beginning, you should be more careful about your conclusions.

        My conclusions actually don't depend on knowing anything about Robinhood... they depend on knowing about the general effects of press exposure on business. I didn't coin the phrase "All press is good press".

        I could absolutely see the recent news cycle sparking interest in a lot of people who have never traded before... and only one broker is being named in the news.

    • You don't even believe this yourself, do you?

      Hosehold name... yes, the same way Stalin was a household name in Asia. ;)
      Except, the mini-me version! Good enough for five minutes of a flash in the pan. A literal one for their CEO. ;)

      • You don't even believe this yourself, do you?

        Of course I do, or I wouldn't have written it.

        There's a long, long history of companies obviously benefiting from bad press. "All press is good press" is not a phrase I made up.

  • as bad advertisement.
  • Even considered glamorous. Then the local residents blow through their disposable cash, and the casino more and more depends on habitual users. Dilapidation, and then the risk of going out of business, can soon follow. Robinhood has an online presence, so it won't appear to becoming played out and shoddy, but that vibe could become attached to if a hangover sets in after many of its customers have had time to let their losses sink in.

  • Maybe they just tried to reinstall cause it was clearly broken!

  • WallStreetBets didn't help here (Score:3)

    by Whateverthisis ( 7004192 ) on Tuesday February 02, 2021 @07:07PM (#61021408)
    As much as I'm for what WallStreetBets did to put the hurt on the hedge funds, because short-seller hedge funds are nothing but institutionalized sharks who feed off the hard work of good people, there was also a big mistake here. When people started posting screenshots of their trading accounts, they inadvertently also sent a message that activity like this made the average guy rich. I mean some of these guys made $1M or even $10M in a few months! The key guys know this is play money and not real and many saw a chance to hurt short sellers, but what many others saw is that huge profit, and will want to get in for that money.

    Those guys did a good thing with what they did for sure, but I think a lot of people will see this as a get rich quick scheme and try to jump in for that, and get burned as a result.

    • People have to remember that the only way money is made on Wall Street is when a company pays dividends on earnings, interest paid on a loan or bond, or the company initiates a stock buyback of some sort. Otherwise, your "profits" is from someone else buying the stock that you own. So the $10 M in 'profit' that some traders gained out of the GME game was on the backs of many, many other people who lost $10 M.
  • Why would I entrust my data to you?? You screwed me when I was just trading open stock, so fuck-you, you scumbag!

  • Screwed its users? (Score:4, Interesting)

    by DrXym ( 126579 ) on Wednesday February 03, 2021 @08:46AM (#61022668)
    How so? Robinhood is a brokerage and has to have funds for the trades people make on margin to settle its books. And if Robinhood uses a clearing house then they have to deposit funds with the clearing house to settle trades. So if a hundreds of thousands of people all arrive in a single day suddenly wanting in on the GME action with margin trades or fractional trades or before their funds clear then RH are going to be squeezed. And they were squeezed.

    No conspiracy required.

    The funny part to me is many of those dummies who opened their RH accounts and successfully managed to trade GME shares are going to get fucked hard when the price collapses again. And they'll probably find a way to blame RH for that too rather than their own stupidity for joining a crowd sourced pump and dump.

    • How so? Robinhood is a brokerage and has to have funds for the trades people make on margin to settle its books. And if Robinhood uses a clearing house then they have to deposit funds with the clearing house to settle trades. So if a hundreds of thousands of people all arrive in a single day suddenly wanting in on the GME action with margin trades or fractional trades or before their funds clear then RH are going to be squeezed.

      This is total BS. The solution to covering the margin is to have users deposit money to cover it, not to tell users they can't buy under any circumstances.

      • Re: (Score:2)

        by DrXym ( 126579 )
        It's not BS, it's basic economics. If hundreds of thousands of people pile onto your service and try to buy stock then you need the money on the books to do it and if you don't then you're going to implement restrictions. And that's what they did. I'm sure people who persisted for a few days were more able to conduct these trades as RH improved their books. Even so, they'd be idiots if they did.

  • Robinhood: We're democratizing trading for the average person!
    Peasants (aka Retail traders): Let's make money by banding together against the greedy rich hedge funds and market makers who make money at our expense
    Sheriff of Nottingham (AKA Hedge Funds): Stop that Robinhood! We don't like it when you help steal from us to give to the poor.
    Robinhood: Ok Sheriff, Sir. I'll keep those peasants in their place.
    Robinhood then Disables all buying of meme stocks to help preserve o

    • I think the best analogy I can come up with... Casino's actually encourage and applaud things like people teaching card counting etc.... Because in reality 99% of people cannot do it even if they know how, and they wind up betting more and losing more to the house. Sounds to me like Robinhood underestimated it's users. it assumed they were either too small to put real money towards making a change in the market. or too stupid to think about organizing. Whatever the case robinhood never had any intention of

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