Robinhood, the people’s trading app is going public. Now, the people will be able to buy and sell stock in Robinhood on Robinhood! Meta! But do “the people” believe in the future of Robinhood Financial LLC? Well, the stock trading platform has stayed in the public eye consistently for the past year or so for good and bad reasons (See: GameStop-Gate). But as the company announced the IPO, it also revealed thousands of users will receive portions of a $70 million settlement for the year’s damages. So, what does the future hold? Is Robinhood safe to use now? Will it be a good investment?
Robinhood’s bad run-ins
Robinhood recently disclosed the settlement of a wrongful death lawsuit in its S-1 filing. Last June, 20-year-old Alex Kearnes took his own life when he logged into his Robinhood account and saw that he owed $730,000 that he didn’t have. The balance was not an actual reflection of his portfolio’s balance or any debt owed but most likely a temporary balance shown because Kearnes had made a series of complex options trades on the app. When he reached out to Robinhood for help just days before his death, he received no reply from customer support.
And this settlement is not the only one Robinhood has had to pay. The Financial Industry Regulatory Authority (FINRA) announced that it agreed on a $70 million settlement that the stock app will pay thousands of users. According to FINRA, to reflect the severity of the situation, the sanctions represent the largest financial penalty ever ordered by the organization. The payout is due to several grievances, including lack of information about financial education for new users, system outages that lost users’ money and allowing unqualified people to trade options.
Is Robinhood safe to use? Robinhood’s founder has apologized for some of these issues in the past. But only time and actions will show users that the platform can be trusted.
Good news for Robinhood
At the beginning of the year, people vowed to boycott Robinhood because it blocked people from trading Gamestop stock just when the price was skyrocketing “to the moon.” Some even speculated that the app was in bed with hedge funds that lost money shorting $GME. Despite all of the controversy and commotion, Robinhood still saw an increase of six million users in 2021.
This surge of new users could be a sign that people are more interested in learning about investing than they are in scandals. So, with Robinhood going public, could it lead the market for stock trading apps? It still remains to be seen.
What are your Robinhood stock predictions? Let us know in the comments.
