Robinhood Moves to Put Meme Stock Controversy to Rest
Robinhood is
close to finalizing a settlement with a group of investors who sued the online
brokerage over its decision to restrict trading in GameStop Corp. and other
meme stocks during a frenzy in early 2021, according to a court filing.
Robinhood Getting Closer
to Settlement in Meme Stock Trading Lawsuit
In a May 28
filing in federal court in Miami, Robinhood’s lawyers said the company is
“in the process of finalizing the settlement” with the investors and
expects the case to be settled and dismissed within the next two weeks. The
filing did not disclose the potential settlement terms between the trading
platform and retail traders.
The
investors, led by plaintiff Blue Laine-Beveridge, had accused Robinhood of
manipulating the market and causing them to lose money by limiting their
ability to buy shares of GameStop, AMC, and other meme stocks that had soared
in popularity among retail traders.
The trading
restrictions, put in place from January 28 to February 4, 2021, sparked outrage
among Robinhood’s customers and drew scrutiny from lawmakers and regulators.
Robinhood said at the time that buying in the affected stocks had to be limited
due to a surge in clearinghouse deposit requirements.
The lawsuit
is one of several that Robinhood has faced over handling the meme stock trading
frenzy. The company denied wrongdoing and said that the restrictions were
necessary to protect the firm and its customers.
The
settlement comes after US District Judge Cecilia Altonaga denied the investors’
request to file a motion for class certification in April. The judge had
previously denied a similar request in November.
Shares of
Robinhood, which have fallen sharply since the company went public last year,
rose by 3% during Wednesday’s session, closing above $21. This year, HOOD
shares are up more than 65%, but they are still down about 35% from their 2021
IPO.
Robinhood Reclaims the
Throne in “Meme Frenzy”
This month,
the market once again witnessed a surge in meme stocks, driven partly by the
cryptocurrency market. Despite being criticized by investors for its actions
three years ago, Robinhood has once again emerged as a leader in this trend,
which ended as abruptly as it began.
Vlad Tenev,
the broker’s CEO, revealed that May 14 was one of the “biggest days in the
past 12 months” for his company, as the daily equities trading volume
touched $5 billion. In comparison, Robinhood’s total monthly equities trading
volume was $70.7 billion in April, down 17 percent from the previous month’s
$87.7 billion. Interestingly, in April 2023, the broker only handled $38.9
billion in equities trading volume.
We’re going to be upgrading some of our systems tonight to make sure we’re prepared for even higher load.
Some features, including 24 Hour Market, may not be available for a short period during the window of 1AM to 3AM ET.
The team is working hard to ensure things are running…
— Vlad Tenev (@vladtenev) May 15, 2024
The return
of the meme stock mania in 2024 was sparked by a single tweet. Keith Gill,
known online as “Roaring Kitty” and considered the catalyst of the
pandemic-era stock craze, reappeared on Twitter after three years. On Sunday,
he posted an image depicting a man sitting in a chair. While this might seem
like an insignificant picture, gamers recognize it as a meme indicating that
“things are getting serious.”
— Roaring Kitty (@TheRoaringKitty) May 13, 2024
Although
GME shares at one point rose by nearly 500% during the month, the gains have
now mostly disappeared. The profit at the end of May stands at “only”
90%, with the shares trading at their highest level since August 2023.
In the
newest update from this week, the retail trading company also announced its
first share buyback plan. Robinhood wants to repurchase shares worth $1 billion
in the period of the next 2-3 years.
Robinhood is
close to finalizing a settlement with a group of investors who sued the online
brokerage over its decision to restrict trading in GameStop Corp. and other
meme stocks during a frenzy in early 2021, according to a court filing.
Robinhood Getting Closer
to Settlement in Meme Stock Trading Lawsuit
In a May 28
filing in federal court in Miami, Robinhood’s lawyers said the company is
“in the process of finalizing the settlement” with the investors and
expects the case to be settled and dismissed within the next two weeks. The
filing did not disclose the potential settlement terms between the trading
platform and retail traders.
The
investors, led by plaintiff Blue Laine-Beveridge, had accused Robinhood of
manipulating the market and causing them to lose money by limiting their
ability to buy shares of GameStop, AMC, and other meme stocks that had soared
in popularity among retail traders.
The trading
restrictions, put in place from January 28 to February 4, 2021, sparked outrage
among Robinhood’s customers and drew scrutiny from lawmakers and regulators.
Robinhood said at the time that buying in the affected stocks had to be limited
due to a surge in clearinghouse deposit requirements.
The lawsuit
is one of several that Robinhood has faced over handling the meme stock trading
frenzy. The company denied wrongdoing and said that the restrictions were
necessary to protect the firm and its customers.
The
settlement comes after US District Judge Cecilia Altonaga denied the investors’
request to file a motion for class certification in April. The judge had
previously denied a similar request in November.
Shares of
Robinhood, which have fallen sharply since the company went public last year,
rose by 3% during Wednesday’s session, closing above $21. This year, HOOD
shares are up more than 65%, but they are still down about 35% from their 2021
IPO.
Robinhood Reclaims the
Throne in “Meme Frenzy”
This month,
the market once again witnessed a surge in meme stocks, driven partly by the
cryptocurrency market. Despite being criticized by investors for its actions
three years ago, Robinhood has once again emerged as a leader in this trend,
which ended as abruptly as it began.
Vlad Tenev,
the broker’s CEO, revealed that May 14 was one of the “biggest days in the
past 12 months” for his company, as the daily equities trading volume
touched $5 billion. In comparison, Robinhood’s total monthly equities trading
volume was $70.7 billion in April, down 17 percent from the previous month’s
$87.7 billion. Interestingly, in April 2023, the broker only handled $38.9
billion in equities trading volume.
We’re going to be upgrading some of our systems tonight to make sure we’re prepared for even higher load.
Some features, including 24 Hour Market, may not be available for a short period during the window of 1AM to 3AM ET.
The team is working hard to ensure things are running…
— Vlad Tenev (@vladtenev) May 15, 2024
The return
of the meme stock mania in 2024 was sparked by a single tweet. Keith Gill,
known online as “Roaring Kitty” and considered the catalyst of the
pandemic-era stock craze, reappeared on Twitter after three years. On Sunday,
he posted an image depicting a man sitting in a chair. While this might seem
like an insignificant picture, gamers recognize it as a meme indicating that
“things are getting serious.”
— Roaring Kitty (@TheRoaringKitty) May 13, 2024
Although
GME shares at one point rose by nearly 500% during the month, the gains have
now mostly disappeared. The profit at the end of May stands at “only”
90%, with the shares trading at their highest level since August 2023.
In the
newest update from this week, the retail trading company also announced its
first share buyback plan. Robinhood wants to repurchase shares worth $1 billion
in the period of the next 2-3 years.
