MENLO PARK, Calif. - A small group of investors protested outside Robinhood in Menlo Park on Thursday after the stock trading app halted the ability of its users to buy certain stocks that have seen unprecedented gains in the last week.
Robinhood halted the purchase of at least 13 companies on Thursday, including GameStop and AMC Entertainment which has seen its stock rise in recent days thanks to numerous investors on the Reddit thread "Wallstreetbets" who banded together to drive up the price of those stocks. The goal of these investors has been to fight back against hedge fund companies that bet against GameStop, AMC, and others in a process called "shorting."
Robinhood isn’t alone. Trading apps like Webull, Stash, and Interactive Brokers were among the other trading platforms that halted the ability to buy some stocks creating frustration and anger among retail investors. It only allowed their users to sell those stocks.
GameStop shares peaked Thursday around $480 before they dropped sharply as the buying halt happened. In an interview on CNBC, Robinhood’s CEO Vlad Tenev said the decision to halt trading was not made lightly, but rather as a move to protect its customers while following legal obligations and guidelines. Still, investors were upset with the move.
"People have a right to do what they want with their money and it doesn’t matter how risky the investment may be, it doesn’t matter how volatile the stock may be, I don’t think it’s right for a platform to be limiting what people do with their money," said Michal, an investor who has been following the developments closely.
One user who spoke to KTVU anonymously said he feels the decision halt trading was unfair and he considered it market manipulation. He said his transaction on Robinhood was scrapped Thursday morning.
"They told me I cancelled my further investment into Nokia, but I had never done such a thing," the investor said.
Other users tried to abandon Robinhood for another trading platform, but reported not being able to withdraw their money from the app.
Mitchell Lee Marks, a business advisor at joiningforces.org and a professor at San Francisco State University, said there is a lot of momentum on buying certain stocks, but it’s only good for the people who get in first. He said shares may rise in risky stocks like GameStop or AMC, but will ultimately come down.
"If you look at it from the perspective of Robinhood… on the one hand they are doing a service to their customers by stopping [trading] so it doesn’t continue to plummet," Marks said. "On the other hand, they’re restricting people the right to buy and sell stocks."
He said he does not believe there is market manipulation at play.
"Manipulation is a strong word that has a lot to do with corruption and having bad motives," he said. "In this case, something crazy is happening. It is absolutely crazy and I think the Robinhood folks are trying to deal with a very uncomfortable situation."
Some investors said they believe hedge fund companies took advantage of restrictions to buy, which forced investors to panic and sell their shares. Marks said he doesn’t like the idea of "selling short," but said it is perfectly legal.
A class action lawsuit was filed against Robinhood in New York for restricting trading. Several lawmakers called for an investigation into Robinhood and other trading platforms after the events that unfolded at the start of the trading day.
In an email to its users, Robinhood said it plans to reopen limited buys on Friday, but would monitor the market and make adjustments as needed.
Cristina Rendon is an Anchor/Reporter at KTVU Fox 2 News. You can email her at Cristina.Rendon@foxtv.com or follow her on Twitter: @cristinaktvu, Instagram: @cristinarendontv