Robinhood Financial, the online broker that is wildly popular with Reddit-fuelled day traders and other retail investors who have started actively trading in stocks during the pandemic, is taking issue with comments made by Berkshire Hathaway chief Warren Buffet over the weekend.
On Saturday, during Berkshire’s annual shareholder meeting, Buffet compared the millions of inexperienced day traders who entered the stock market over the past year to gamblers, and said Robinhood has attracted, “maybe set out to attract”, a large number of people who are just gambling on short-term price movements.
Berkshire’s vice chairman, Charlie Munger, was harsher, saying it was “deeply wrong”.
“Two of the most iconic investors insulted a new generation this weekend. Why? Because we are doing things a new way,” Robinhood’s head of public policy communications, Jacqueline Ortiz Ramsay, wrote on a blog post published on Monday.
The post, titled “The old guard of investing is at it again”, took aim at Buffett, whose nickname is the “Oracle of Ohama” and Munger, both of whom have built up their reputations as market sages over decades.
“If the last year has taught us anything, it is that people are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing,” wrote Ortiz Ramsay. “And at Robinhood, we’re not going to sit back while they disparage everyday people for taking control of their financial lives.
Ortiz Ramsey accused Buffet and professional investors in general of trying to preserve a status quo that exacerbates wealth inequality in the United States.
“It is clear that the elites benefited from a stock market that kept many families sidelined from participating while they amassed huge wealth from decades of investing — driving a deep wedge between the haves and have-nots,” wrote Ortiz Ramsay. “Suddenly, Robinhood and other online trading platforms have opened the doors of financial markets to everyday people, deeply unsettling the old guard who will fight to keep things the same.”
Robinhood’s business model came under fire and drew Congressional and regulatory scrutiny in the wake of a trading frenzy surrounding GameStop. Shares of the video game retailer soared from just more than $17 a share on January 1 to more than $347 by January 27. They are currently trading at about $174 a share.
The steep rise in GameStop and other meme stocks like theatre chain AMS were propelled by posts on social media sites, notably Reddit group WallStreetBets, and led to some investment pros who had bet against the stocks incurring steep losses.
But the frenzy also saw Robinhood place temporary curbs on trading in those stocks and others, angering retail investors, some of whom sued Robinhood, and leading to charges that the trading platform favoured the Wall Street pros over the little guys.
Last month, Massachusetts regulators announced they are seeking to have Robinhood’s broker-dealer licence in the state revoked, accusing it of encouraging inexperienced investors to make risky bets that could result in heavy losses. The move was a follow-up to a complaint filed by the state against Robinhood in December.
Robinhood filed its own suit in response, and published a blog post that accused Massachussetes regulator of “the old way of thinking”.