Robinhood nears its biggest trade of all, an IPO, after wild year
Summary
Social media made stocks a form of entertainment for many while professional sports were on hold, and people had more free time while working from home, as well as stimulus checks to invest for those fortunate enough to not be living on the financial edge. Michael Wong, director of equity research for the financial services sector at Morningstar, said Robinhoods IPO may be timed to take advantage of the bull market in stocks before it ends, and before regulators make any decisions related to payment for order flow. Massachusetts regulators filed a complaint against Robinhood, accusing it of failing to act in the best interests of its clients and using "aggressive tactics to attract inexperienced investors, its use of gamification strategies to manipulate customers, and its failure to prevent frequent outages and disruptions on its trading platform." His longtime Berkshire Hathaway investing partner, Charlie Munger, added that the app has created "a culture which encourages as much gambling in stocks by people who have the mindset of racetrack bettors" and called it "a dirty way of making money." Payment for order flow, in tandem with heightened trading volumes, has played a substantial role in "filling the zero commission revenue hole," according to a recent report from Piper Sandler brokerage sector analyst Rich Repetto.
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