CONSEQUENCES

One of the biggest losers in this movement is Melvin Capital which lost 53% of their assets in the month of January alone (and that was assessed after a $3 billion emergency loan). They held a very large short position in GameStop, among many other of the targeted stocks. Other hedge funds held multiple short positions in the stocks that were targeted.

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In the midst of these insanely high stock prices, Robinhood decided that it would no longer allow its users to purchase many of the stocks that Reddit was targeting. As a result, since the massive influx of buy orders was the only thing maintaining the high prices, the stocks all plummeted in price.

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Retail traders helplessly watched GameStop drop from $347 to $53 in just a week. While the lucky few got out with a profit, millions of retail investors lost their investments due to the actions of Robinhood.

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Allegedly, Robinhood made this decision as a form of damage control for their business partner: Melvin Capital. Because of these allegations, a Congressional hearing is scheduled for the near future to investigate Robinhood's alleged infringement on free trade. Depending on the outcome of this hearing and the subsequent investigation, a class action lawsuit against Robinhood (and maybe others) may ensue. Regardless of the outcome of this investigation, however, it seems that Robinhood is probably burned for good as the go-to for retail investors: its ratings in the Play Store plummeted to 1.1/5 stars (the minimum is 1!) shortly after they issued the order to restrict their users' trades.