#Small investors flee Robinhood in wake of GameStop restrictions
“#Small investors flee Robinhood in wake of GameStop restrictions”
Some of Robinhood’s customers are jumping ship in light of the trading app’s controversial decision to ban buying in runaway stocks like GameStop.
Even as the app eases restrictions on 16 popular stocks, users say they feel too betrayed to stick with the service, which made its name by vowing to “democratize” trading.
“It felt like a slight from a company whose purpose is to democratize the stock market — until it wasn’t convenient for them,” Jhordany Nunez, 23, of Ossining, NY, told The Post.
“Once I pull out of my position in GameStop, I plan on taking my money out and using my other account exclusively,” said Nunez, a legal assistant who has a no-fee Charles Schwab trading account.
Cameron Smith of Queens, also 23, said he’s already started the process of bidding farewell to the app by withdrawing roughly $22,000 in profits from his GameStop trades this week and putting $6,000 of it into a new You Invest account with JPMorgan on Thursday, which promises “$0 commission trading.”
The rest he’s putting away in his savings accounts.
“I was sitting on $19,000 of buying power on Thursday and getting ready to do another option call because I thought the stock would reach $500 when I heard that trading on Robinhood was frozen,” Smith told The Post. “I thought, ‘wow this is not good,’”
Being forced to sit on the sidelines while institutional investors covered their losses had Smith seething, he said. “They are playing dirty,” he said of Robinhood.
The backlash comes after the no-fee trading app on Thursday clamped down on buying in 13 stocks popular with Main Street investors, including GameStop and AMC. The stock trading pioneer only let customers sell positions of certain securities.
Robinhood, who’s popularity skyrocketed with the pandemic, also raised margin requirements and said it would close out some positions automatically for client at risk of not having the necessary collateral to back their trades.
Robinhood attributed the move to its own capital requirements and quickly raised money in an effort to ease the restrictions on Friday. But that didn’t stop users like David Portnoy of Bar Stool Sports from demanding the app pay the ultimate price.
“Robinhood must die,” Portnoy tweeted to his 2.2 million followers on Thursday.
GameStop shares closed up 67 percent on Friday to $325 a share. The stock is up over 1,600 percent this year as novice investors join forces via investment message board like Reddit’s WallStreetBets to trade ideas and egg each other on.
The buying frenzy has resulted in Gamestop’s market value ballooning from roughly $1 billion to more than $20 billion — raising concern about a bubble.
TD Ameritrade this week also placed “several restrictions” on some transactions involving GameStop, AMC and other securities on its trading platform “in the interest of mitigating risk for our company and clients.”
But the restrictions have led to criticisms that small investors are being unfairly punished for activity Wall Street engages in all the time — namely risky speculation. And it’s fueled conspiracy theories about powerful Wall Street names betting on stocks like GameStop to decline.
The company has said it’s only trying to protect itself and it’s investors — the later part of which isn’t sitting well some customers.
Smith said he found the language “patronizing.” He pointed to his own success navigating the wild ups and downs of stocks like GameStop leading up to the investment clamp down, despite extreme volatility.
Smith says his recent option purchases netted him $4,000 on Monday, $5,000 on Tuesday and $10,000 on Wednesday. On Thursday he made another $1,500 via call option contracts on Nokia, AMC and Workhorse Group, he said.
The extra cash couldn’t have come at a better time for the lab technician, who recently lost his mother and now lives with a disabled brother and their grandfather.
“I’ve become the head of my household paying the bills for the family,” he said. The cash “will help me not to worry as much.”
Smith says he’s also starting sharing his investing prowess with friends, alerting them last week to what he believed would be a run on GameStop’s shares.
“Some of my friends are seeing a comma in their bank accounts for the first time,” Smith said.
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