The more troubling aspect of all this isn’t the cries of hedge fund managers but the trading restrictions applied to Robinhood account holders. The democratization of the stock market doesn’t mean much if the taps can be turned off when the gatekeepers complain. At this stage, it’s too early to predict the legal impact of that decision, but it looks like the U.S. House Financial Services Committee and the Securities and Exchange Commission are both going to investigate what happened.
It will take some time to see how Robinhood itself is impacted, or determine the future direction of the Reddit-led investor community. There are a few takeaways we can take be sure of now, however.
First, despite the recent trading restrictions, Robinhood and other similar trading apps have lowered the barrier to entry for the average person to engage on a fair basis in public markets. This is undoubtedly a good thing, and we should advocate for more of this on an increasingly transparent basis.
Next, shutting down trading of particular stocks for what appears to be political reasons is extremely problematic. We should demand answers from those who made the decision, and work towards a system where this can’t happen.
Additionally, predatory short sellers are a problem in the market, but got a taste of their own medicine in this case. The market won out over big hedge funds that acted as if they were invincible. It’s possible this will be a watershed moment for public markets if it changes long-term behaviour.
Fourth, hopefully the public interest in this story will lead to more financial literacy among average people, in particular for younger generations who (not unfairly) view the stock market as being somewhat rigged, and not in their favour.
Finally, this isn’t the end of the GameStop story. At some point, economic reality will set in and someone will be left holding the bag. There’s a reason this stock was heavily shorted, and when the Reddit money moves on to something else (now that they’ve beaten back the hedge funds), GME is going to fall back to earth and cause a lot of pain to average investors.
At Popular Capitalism, we aren’t going to re-invest stock market regulation overnight, but we will continue to advocate for a popular capitalist public stock market in which anyone with savings can access a fair, efficient, transparent and open trading platform. The GameStop Revolution may end up being a flash in the pan, but the direction it’s pointing in is the right one.