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Can We Trust Robinhood?

March 15, 2021
497 Views

By FLOSS Finance Team

By all accounts, Robinhood is the go-to trading app for the small retail investor, but a recent Fortune survey showed that 56% of their clientele were thinking about leaving.  A few weeks ago, during the GameStop frenzy, Robinhood and other brokers prevented investors from purchasing shares of certain stocks. During this period, investors were only allowed to sell their positions in these stocks. Some of these include AMC, GameStop and Nokia.

This sent several investors through the roof and many people are leaving the Robinhood platform for their trading needs. Some investors felt Robinhood may be in bed with hedge fund managers and was protecting their own financial bottom line. 

Due to the limited trading GameStop debacle and a recent $65 million SEC fine, some may suggest that Robinhood has lost a little of its shine.  However, these are the growing pains of a company that is rapidly expanding and may misstep as they adjust. Their brand recognition, new account growth, and company value has continued to climb through all the drama.  Many venture capitalist investors have shown their confidence in Robinhood by giving them a cash infusion of $3.4 billion. With that type of financial backing, there is the possibility of Robinhood offering its very own shares in an IPO sometime this year.

Unfortunately, Robinhood also needs to win over the confidence of the customers who are feeling disenfranchised with a perceived notion that they were sold out. That frustration has led to a few traders filing a class-action lawsuit, along with a suit by the parents of a customer who committed suicide.  Even politicians Alexandria Ocasio-Cortez and Ted Cruz both feel that Robinhood’s actions should be investigated thoroughly.

How can Robinhood win back their client base? They can start by broadening their infrastructure, increasing their technology resources, and upgrading their customer services.  One of the biggest pet peeves that the tech company must listen to, is that their customers feel as if they cannot reach them. The other option may be to provide their customers with shares to their initial public offering. That may settle things down if the deal is a success! What would it take for Robinhood to win you back? Send us your feedback.  

Check us out next week as we dig into the student loan forgiveness debate.

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