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July 26, 2022

July 29th Marks the One-Year Anniversary of Robinhood’s IPO  

To:       Interested Parties

From:  Dennis Kelleher, Co-Founder, President and CEO

(Media Contact: Anton Becker, Dir. of Communications  abecker@bettermarkets.org)

Date:   July 26, 2022

Re:       July 29th Marks the One-Year Anniversary of Robinhood’s IPO

One year ago on Friday, July 29th, the financial firm Robinhood went public at $38 a share. Today, the stock hovers at around $9 a share. In the past year, Robinhood has lost 10% of monthly users and laid off 9% of employees. Robinhood’s retail traders have fared even worse, especially during the Gamestop Frenzy of 2021.

Of course, it wasn’t supposed to be like this. Robinhood claimed it was going to “democratize Wall Street” by providing easy access to stock market riches and less expensive, if not free, financial products and services. While Wall Street and finance more generally can and should be democratized, the Robinhood model based on maximizing frequent high-risk trading, prompted by predatory gamified apps to generate as much payment for order flow (PFOF) as possible, is not how.  These are exploitive practices that enrich Wall Street often at the expense of those least able to afford the losses.

Robinhood’s IPO anniversary is also an opportunity to look back on January 2021 when a trading frenzy erupted in the stock market around so-called “meme stocks” like GameStop. In just 16 days, GameStop’s share price rose by 1,600% for no apparent reason. The trading frenzy was fueled by new retail traders talking on Reddit subforums like w/wallstreetbets, many of whom  were determined to hurt hedge funds shorting the meme stocks. (They, in part, succeeded.)

Most of these retail meme-stock traders and redditors were using apps like Robinhood, until the app suddenly prohibited certain transactions, such as buy orders on stocks like GameStop and similar meme stocks, effectively helping Wall Street hedge funds shorting the stock, but hurting retail traders and Main Street investors.

The bottom line: Equity markets and finance can be democratized without the exploitation and manipulation we have seen with Robinhood. Better Markets has followed these issues closely and produced a myriad of resources about Robinhood, gamification, payment for order flow, short selling and more. As we approach Robinhood’s IPO anniversary, it is important to remember the highlights and lowlights of this company, the false promises, and the damage it has caused.

A sampling of Better Markets’ work on Robinhood is below:

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