Robinhood Sued Over Gamestop (GME) Positions

Robinhood is being sued and also alledgely selling investors Gamestop stock (GME) without warning or consent.  This comes after they restricted several stocks other companies from investors to trade that this morning.

4:38 PM Update: We just received a notice that Robinhood will start allowing some buying and are slowly backing off some their trade restrictions. “ Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed.

We are in the process of verifying the Robinhood notice that it sold a clients shares. It could have also been a “margin call.” See the notice below:

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Robinhood notice

A growing list of high-profile people who are angry with Robinhood’s decision to stop retail (everyday) investors from trading shares of GME and now also AAL, AMC, BB, BBBY, CTRM, EXPR, GME, KOSS, NAKD, NOK, SNDL, TR, and TRVG.  Robinhood and other broker-dealers are effectively shut out retail investors out of the market and letting institutional investors like hedge funds to do what they pleased. 

abs-adviso-reportr

Now a growing disparate group of public figures, including Congresswoman AOC, Senator Ted Cruz and world’s richest man Elon Musk, banded together to slam Robinhood and its peers.

Musk agreed with AOC’s tweet where she said:

“This is unacceptable. We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I’d support a hearing if necessary.”

Musk also agreed with one twitter user who said “make shorting illegal”…

ABS REPORT

Robinhood and other broker-dealers actions have ignited a massive storm.  Thousands of investors are now rightfully demanding to know why these stocks and options were put on some ad hoc restricted list without any warning.  The customers are threatening to take their money to other brokers and politicians threatening hearing.

The NY Young Republican Club has announced a “Re-Occupy Wall Street” protest in Zuccotti Park in response to brokers shutting down trading on Game Stop and other memed stocks.

Citadel and SAC Point72 were some of the public big name hedge funds that had shorts, but there were many more that had signficant positions.

According to Ortex, a financial data analytics firm,  short sellers (mostly hedge funds) are sitting on estimated losses of $70.87 billion (puts and other not included) from their short positions in US companies!  As of Wednesday, there are loss-making short positions on more than 5,000 U.S. firms.

The hedge fund strategy of stopping investors from buying GME and other stocks appears to be working in their favor as it is rumored that Citadel is now opening up short positions again.

Many independent financial news sites like Zerohedge are supporting Robinhood investors and calling out Robinhood.

Bottom Line

We are DISGUSTED with the response of brokerdealers like Robinhood that are limiting access to stocks while hedge funds run business as usual. We strongly believe in Capitalism and that the markets should be OPEN to everyone.  It is up the individual on picking their investments and accessing their OWN RISKS and their choices should not be limited by a government, brokerage firm or trading elite.

Is Gamestop (GME) a good buy?  From analysis of the company’s financials and current business model, no it is not a typical good buy.  GME recently acquired leadership that is going to convert its “brick and mortar” retail to online and it looks very promising. However, the stock itself has HUGE movement is a momentum buy for investors looking for very risky trade.

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