Robin Hood is in the news this week because Robinhood the online “free commission and investing app” is in the news because a group of redditors got one over on big hedge funds looking to short the stock. For the uninformed this article has a great explanation of what shorting a stock is.
One of my favorite animated Disney movies is the 1973 version of Robin Hood where all the characters are animals. There is a running dialogue if Robin is a good guy or bad guy and at one point Robin says “Rob? That’s a naughty word. We never rob! We just…sort of borrow a bit from those that can afford it.” Given the current situation it seems this question is true for Robinhood the app. Is it a good thing or bad thing.
On one hand, it has allowed young investors get into the game without high commission fees on trades. This became the platform of choice for users of the sub reddit r/WallStreeBets to purchase Game Stop stock and drive up the price thus screwing up the hedge funds who were shorting the stock. On the other hand, as the price of Game Stop stock soared, Robinhood attempted to halt the speculation by first stopping all trades and then only allowing their user to sell the stock which once again benefited the hedge fund investors.
So is Robinhood (the app) the good guy or the bad guy?