Why Robinhood is trying Warren Buffett
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Warren Buffett and his right-hand man Charlie Munger take reviews from the Robinhood online trading platform.
Buffett and Munger co-chair together Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B).
Legendary investors, both in their 90s, are largely traditionalists when it comes to their investing style. Berkshire is known to buy quality businesses at competitive prices and hold onto them for the long haul.
So it’s no wonder that people in their 90s aren’t big fans of Bitcoin, to say the least.
At Berkshire’s annual general meeting, which took place in the virtual space on May 1, Warren Buffett also expressed his dismay at Robinhood. Buffett said the online trading platform has exacerbated the “casino aspect” of investing in the stock market.
How did Robinhood respond to Warren Buffet?
After the snub from Warren Buffett, Robinhood retaliates.
As Bloomberg reports, Robinhood’s public policy communications manager Jacqueline Ortiz Ramsay returned a blog post saying:
People are tired of the Warren Buffetts and Charlie Mungers of the world acting as if they were the only oracles to invest. Robinhood and other online trading platforms have opened the doors to the financial markets for ordinary people, deeply disrupting the old guard who will fight to keep things the same… At Robinhood, we are not going to sit idly by while they disparage ordinary people for taking control of their financial lives.
Ortiz Ramsay noted that most of Robinhood’s customers buy and own stocks to make their best eggs.
It may be true. However…
Robinhood GameStop Days
We’re pretty sure Warren Buffett didn’t jump on the GameStop GameStop Corp. (NYSE: GME) craze.
Now, you probably haven’t read much on GameStop lately. Indeed, the share price of the US video game and consumer electronics retailer has returned to some normal in the past 30 days. (It went down about 15%.)
A very different story from the early months of 2021, when frenzied retail traders increased stocks by 708% in just 6 days, January 21-27.
Indeed, fortunes have been made by some and lost by others who jumped on the GameStop bandwagon. Often in a few days. On the losing side, anyone who bought shares on Jan.29 would have considered a 72% paper loss on Feb.2. Ouch!
Faced with regulatory pressure and citing “recent volatility,” Robinhood elected to freeze all purchases in GameStop on its platform on January 28. GameStop shareholders could still use Robinhood to sell their shares.
The online trading app also froze trading in other Reddit military-powered stocks, including AMC Entertainment Holdings Inc (NYSE: AMC).
The next day, Robinhood caved in to angry users by allowing limited trading on stocks like GameStop. However, it maintained restrictions on the number of shares users could trade on a given day, as well as the ban on fractional shares.
We imagine that Warren Buffett probably won’t be impressed.