The CEO of Robinhood, along with the founder of Citadel and cofounder of Reddit, got hammered during a congressional hearing on Thursday as lawmakers looked into the GameStop fiasco. But did the public learn anything new? Not really.
We all know D.C. is slow to act, and that action happens only after a lot of political theater. So Robinhood’s greatest threat, right now, is likely to be retribution from its own users.
When GameStop shares soared last month—topping $483 at one point—Robinhood announced it would limit retail purchases of GME and other hyped shares, such as AMC. Soon after, GME (along with AMC) lost its upward trajectory. Many traders now blame Robinhood for manipulating GME shares downward. (The company says limits ensured that it could meet its clearinghouse deposit requirements—which rose 10-fold during the frenzy. As of Friday’s open, GME shares are trading at $41.28.)
To find out how the fallout of these events will impact Robinhood, Fortune and Civis Analytics surveyed 2,336 U.S. adults, including 1,378 investors and 238 Robinhood account holders, between Feb. 5 and 7.
The survey has a 3 percentage point margin of error. When broken-down to an investor-level it rises to 3.9 percentage points. When looking solely at Robinhood account holders, the margin of error rises to 9 percentage points.
The takeaway? Robinhood has severely damaged its brand.More than half (56%) of Robinhood account holders are considering leaving the platform as a result of the fiasco. Forty percent of Robinhood investors say they aren’t considering it, and 4% say they’ve already left the platform as a result of its stock limiting.It looks like Robinhood is learning the lesson Warren Buffett preached for years: “It takes 20 years to build a reputation and five minutes to ruin it.”
Before this mess, Wall Street speculated that Robinhood could IPO with a valuation over $20 billion. So the $20 billion question is, Will Robinhood accounts actually close en masse? It’s too early to tell. But there is also reason for skepticism: Switching brokerages does require effort, not to mention Robinhood is unique in offering both fractional and cryptocurrency trading.
After the GameStop episode, people like Barstool Sports founder Dave Portnoy and Tesla CEO Elon Musk piled on Robinhood. “Ironically Robin Hood took from the rich and gave to the poor, even though they do the exact opposite. I was stunned. I think it’s criminal. I think there has to be an investigation. I think people have to go to jail,” Portnoy told Fox News viewers.
All that bad publicity hurt Robinhood with more than just its own traders.
We asked investors to rate their views of 11 financial firms. Among those, Robinhood (–1 points) was the only firm to have a negative favorability score. That’s even worse than Wells Fargo (+3 points), which saw its popularity flounder for years following its fake accounts scandal.Simply put, you’re in trouble when you’re losing a popularity contest to Wells Fargo.
*Methodology: The Fortune–Civis Analytics survey was conducted between Feb. 5 and 7. We surveyed 2,336 U.S. adults, including 1,378 investors. The findings have been weighted for age, race, sex, education, and geography. The survey has a 3 percentage point margin of error. When broken-down to an investor-level it rises to 3.9 percentage points. When looking solely at Robinhood account holders, the margin of error rises to 9 percentage points.
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FAQs
Robinhood has severely damaged its brand. More than half (56%) of Robinhood account holders are considering leaving the platform as a result of the fiasco. Forty percent of Robinhood investors say they aren't considering it, and 4% say they've already left the platform as a result of its stock limiting.
Why is Robinhood shady? ›
Robinhood claims it is 'free' however, it makes money by payment for order flow. This means they send orders to be executed by trading firms in return for cash payments. These activities are not typical for broker-dealers and raise 'red flags' about the integrity of the business model.
Why to stop using Robinhood? ›
No mutual funds or bonds: The lack of mutual funds and bonds may make it difficult to build a truly diversified portfolio. Customers can only access bonds via bond ETFs. Limited customer support: Robinhood has made noticeable improvements to its customer service, but it's still not on par with other brokerages.
Why is Robinhood not letting me trade? ›
Your Robinhood investing account might be restricted for a number of reasons, including the following: Company control person. Bank transfer reversals. Incorrect or outdated account information.
Is Robinhood losing popularity? ›
However, in September, the platform had just 10.3 million monthly active users -- a 51% drop from the aforementioned 2021 high point. Simply put, customers are trading much less. Like most brokerage firms, Robinhood relies on a high volume of investing activity to generate revenue, so this is a huge problem.
Is Robinhood losing users? ›
Shares of Robinhood fell Wednesday after the retail brokerage reported a drop in trading volumes in the last quarter and said it's looking to expand growth in Europe. Robinhood also reported fewer monthly active users, which fell 16% to 10.3 million in the third quarter from the same period last year.
Why is Fidelity better than Robinhood? ›
Fidelity offers several advanced trading features that are absent from Robinhood's platform. You can trade OTC penny stocks and engage in short selling. Robinhood does not offer OTC penny stock trading or short selling.
Why did Robinhood owe $3 billion? ›
And with the sudden surge in demand for certain meme stocks with rapidly changing prices, Robinhood suddenly needed a lot more cash for its collateral. In a span of three days, Robinhood Securities incurred both a deposit surplus of $11 million and a deposit deficit of over $3 billion.
Is Robinhood a good or bad guy? ›
Robin Hood was a hero in his time. While many believe he was a thief and a villain to the law, others feel he was a hero to the poor. Some people might say that Robin Hood stole from the government, and stealing is a crime, no matter what your cause is.
Can Robinhood keep my money? ›
Your securities and cash are protected by SIPC
Robinhood Financial LLC and Robinhood Securities, LLC are both members of SIPC, which protects securities for customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available upon request or at www.sipc.org.
Is my money insured? Cash in your Robinhood spending account is eligible for FDIC insurance coverage of up to a total maximum of $250,000.
Who own Robinhood? ›
Who owns the Robinhood company? Institutional investors own 31.9% of Robinhood's stock, with retail investors holding 25.2%, private equity firms 21%, individual investors 15%, and private companies accounting for 6.4%, according to Simply Wall Street.
Why did my money disappear on Robinhood? ›
Your money might be unavailable for a few reasons, including: One of your pending transfers was reversed because of an issue with your bank account. The money from that transfer won't be available in your spending or investing account. One of your pending transfers failed due to a one-time system error.
Why are so many stocks not supported on Robinhood? ›
Securities can be untradeable for a few reasons, including: The exchange has paused trading for it. It's been delisted from the major exchanges and trades in the over-the-counter (OTC) market. It's a foreign security, which we don't support.
Why can't i sell all of my shares on Robinhood? ›
You may get a message about “not enough shares'' if you already have an outstanding pending order for the shares you want to sell with a new order. If you get this message, you'll need to cancel any outstanding orders before you can sell the shares.
Is Robinhood good in 2024? ›
It's been a fantastic start to 2024 for Robinhood Markets (HOOD -4.34%). As of this writing, shares are up 46% this year. This gain was boosted by Q4 2023 financial results that were certainly well-received by the market. Investor enthusiasm seems to be on the way up with this booming fintech stock.
How many customers did Robinhood lose? ›
(now "Robinhood Credit"). Monthly Active Users (MAU) decreased 4% year-over-year to 10.9 million.
How many people still use Robinhood? ›
As of December 2023, Robinhood had 23.4 million funded accounts and 10.9 million monthly active users. In April 2022, Robinhood rolled out a cryptocurrency wallet to more than 2 million users. Robinhood Markets, Inc. U.S.
Is Robinhood good or bad person? ›
Robin Hood is a character in popular culture, and is always depicted as good. He is not an historical figure, but only exists in ballads, books, movies, and TV shows.
