Robinhood Stock App Blocks Purchases of GameStop, AMC, and BlackBerry Stock
Posted on 01/28/2021
The stock trading app Robinhood has added new limits restrict users from buying or trading any of the popular Reddit r/WallStreetBets stocks, including GameStop ($GME), AMC ($AMC), BlackBerry ($BB), Bed Bath & Beyond ($BBBY), Koss Corporation ($KOSS), Naked Brand Group Ltd ($NAKD), Nokia ($NOK), and Express, Inc. ($EXPR). Clients of Robinhood will still be permitted o close out existing positions but won’t be able to buy more of the stocks. Robinhood also raised margin requirements for certain securities.
Robinhood encourage stock trading by using gamification. However in this instance, Robinhood is citing “recent volatility” in the market as the reasoning behind the change.
Users will still be allowed to close out existing positions but won’t be able to buy more of the stocks. The company is
Robinhood makes money by selling order flow to large players like hedge fund Citadel. Citadel and Point72 Asset Management recently infused US$ 2.75 billion in hedge fund Melvin Capital, which was short on GameStop, wiping out large amounts of money. WallStreetBets members are calling the move by Robinhood and other brokerages as market manipulation. Payment for order flow (PFOF) is a controversial practice. Former SEC Chair Mary Jo White, have said that PFOFs may create potential conflicts of interest between brokers and clients, possibly undermining the quality of best execution. Robinhood’s revenues from equities and options order flow came to US$ 91 million in a period in 2020, with US$ 39 million from Citadel Securities, LLC. Companies benefiting from order flow from Robinhood include: Citadel Execution Services, G1X Execution Services, LLC, Virtu Americas, LLC, Two Sigma Securities, LLC, and Wolverine Securities LLC.
U.S Representative Rashida Tlaib, a Democrat from Michigan, responded to Robinhood’s decision, tweeting “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.”
Robinhood Investor and Hedge Fund
D1 Capital Partners L.P. is a global investment firm that deploys capital in both public and private markets. D1 was founded in July 2018 by Daniel Sundheim. D1 Capital Partners is an investor in Robinhood. D1 Capital Partners lost about 20% in January 2021 through Wednesday, according to financial media. The hedge fund managed around US$ 20 billion at the start of 2021.
On January 27, 2021, Naked Brand Group Limited, an intimate apparel and swimwear, announced that it has entered into securities purchase agreements with certain institutional investors for the issuance and sale of 29,415,000 of its ordinary shares at a price of US$ 1.70 per share, for aggregate gross proceeds of approximately US$ 50 million, in a registered direct offering priced at-the-market under Nasdaq rules. Maxim Group LLC is acting as the sole placement agent for the offering. The offering is expected to close on or about February 1, 2021, subject to the satisfaction of customary closing conditions.
Keywords: Robinhood Markets Inc.