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Comment by josephorjoe | Hacker News Reader

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josephorjoe

Whatever else happens, Robinhood should not survive this.

They clearly violated their customers' trust, so their customers should leave them.

And I will be completely unsurprised if when the dust settles it turns out they acted illegally.

Also, they suck at lying.

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As has been stated elsewhere, it is easier to recover from alienating customers than it is from running afoul of the SEC. They ran a very real risk of being forcibly shut down by regulators if they didn't slow trading.

I don’t agree. See Tesla. Elon frakked up with the SEC but not his customers (or his fans) and so Tesla a couple years later is on top of the world. I doubt Robinhood will survive this. They built their whole brand around rallying for the little guy at the expense of the fat cats. It’s literally their name.

Tesla isn't an investing firm. They don't even really have much in the way of acquisitions yet. Tesla would have to do something pretty blatant to really piss off the SEC. Elon's $420 tweet was greeted with a slap on the wrist precisely because "you're new here, aren't you?".

The better analogy would be if SpaceX pissed off the FAA.

Tesla actually made an official statement on their website about going private within 24 hours of the tweet. That's what reduced it to a slap on the wrist.

Ask and ye shall receive

https://www.msn.com/en-us/news/technology/elon-musk-e2-80-99...

That's an absolutely awful argument. Elon Musk rich so don't have to bother with the SEC?

Nope. The question was whether it’s worse (in terms of recovery time) to crap on the SEC or your customers, and in which case you’ll recover faster. Elon frakked with the SEC and rightfully had to pay a price for it. But they recovered quickly. I don’t think Robinhood will.

The best thing is to not frak with either the SEC or your customers. And that’s probably always an option, even if it might mean sacrifice.

I don't agree. I think they provide a valuable service they should stay whole IF they can fix their capital issue and make their customers whole. You didn't forsee what was happening and neither did I because it was unprecedented. If not let them sink, someone will provide a similar service and learn from it. The SEC shouldn't be in the market of shutting down companies because a new phenomenon happened, let the market do that, unless something illegal has occurred.

I don't think the SEC should shut them down.

I think they should go bankrupt because their customers leave them for one of their many more reliable and trustworthy competitors.

>They clearly violated their customers' trust, so their customers should leave them.

They did? That might be the case according to the Popular Narrative (that the Hedge Funds phoned them and said "shut it down"), but reality is that they couldn't front the deposits for the customer's trades, due to the insane volatility. In that case it's less violating their customers' trust and more having a product that couldn't handle extreme circumstances well. They are a discount brokerage after all, some compromises had to be made.

The narrative doesn't matter. It's a PR problem. Lots of people wanted to buy GME, then RH suddenly cut them off, offered no reasonable explanation, and then their CEO went on the news to just spew some content-free noise. Sure, there were reasons behind this ban, perhaps good reasons - but they weren't explained by RH, and RH to this moment didn't even admit to the cause of the problem.

Sounds like solid ground for loss of user trust to me.

The CEO said they couldn't cover deposits. He only started spewing nonsense when the obvious question about RH having liquidity issues came up. He didn't lie to retail RH clients, but he may have lied to RH investors. Then again, it's funded by private equity, so it's likely they know all this.

All of this makes sense given the emergency cash infusion of 1B RH got this week.

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