Headline should read "Robinhood used credit that was available to them and paid it back"
But that wouldn't generate the desired panic or clicks now would it
It's yet another sign that this company is teetering on the edge of collapse. That isn't irrational panic. They were completely offline for an entire day during the biggest market rally in over a decade, and have had smaller outages during other recent volatile trading days.
This company deserves to crash and burn. Anyone who still keeps a balance there is insane. People have lost millions and are going to continue to lose because Robinhood is run by amateur clowns.
And their haters. There's a very vocal group of traditional investors who hate Robinhood (and its users) for a variety of (mostly trivial) reasons. Robinhood's service problems over the past couple weeks are finally a legitimate reason for them to air their hate and they would love to see Robinhood fail.
It's true that many other brokers from bit players to top-tier firms occasionally have trouble during intense market days. I've worked in finance on and off for decades, for brokerages, hedge funds, and market makers. I've written systems that process real-time market data and trade directly on exchanges. I'm well aware of the challenges in trade processing systems, and Robinhood simply hasn't built enough testing, redundancy, or scalability into their systems, as we're now seeing.
It also happened on leap day, and there's speculation that their systems were simply unable to handle that. Robinhood denies it, but they also had problems on leap day 2016.
There's no reason that a company like Robinhood can't succeed, and someone in that space will succeed. It may very well end up being Robinhood. But are you willing to bet your own money on that right now?
Robinhood accounts are protected by the SIPC. Although with other discount brokers introducing free trading, I would tend to agree with you that continuing to use RH with its simplistic interface and appalling execution is pretty silly.
This is correct. But SIPC reimbursement can take months. For non-trivial balances, one may need a lawyer to prove ownership.
After that, an accountant would likely be needed to reconcile records, including for tax purposes. (Tax forms are not automatically generated for brokerages in receivership.)
But, I'm sure that Robinhood must be omitting those values on purpose, and the only reasoning I can come to is that they want their users to be less educated because it is more profitable for them.
The real question to come is if a drying up of liquidity is going to torpedo lots of ships. It is simply not possible for a loss making entity to continue losing money forever (unless you are the US Government)
Once free money dries up, a lot of darlings will go down.
> “Companies don’t tap their credit line unless they need to,” said David Ritter, an analyst at Bloomberg Intelligence, who spoke generally about the issue without commenting directly on Robinhood. When companies do, it’s “perhaps not a good signal with regard to their cash burn, which could make creditors nervous.”
“Companies don’t tap their credit line unless they need to,” said David Ritter, an analyst at Bloomberg Intelligence, who spoke generally about the issue without commenting directly on Robinhood. When companies do, it’s “perhaps not a good signal with regard to their cash burn, which could make creditors nervous.”