Robinhood’s Reputation Is Ruined, Permanently

By Douglas A. McIntyre Published Mar 10, 6:34AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Robinhood’s Reputation Is Ruined, Permanently — © filadendron / Getty Images

Robinhood, the next generation trading product, suffered a collapse for the second time. The first time was on a day when the market soared. The second time was when the market collapsed. If traders want anything, it is for their system to be up and running when they have to trade. The massive negative press and customer revolt are so extreme that Robinhood’s reputation, and its future, are in tatters.

Robinhood is a free-trading app that became unusually popular. It claims to have 10 million users (some say 6 million), which makes it larger than most discount brokers. The surge in its success gave it a valuation of $7.6 billion last July. Owners who think that valuation is still that high are kidding themselves.

The press could not have been more negative:

Robinhood goes down again, causing clients to miss out on another historic trading day (CNBC)
Robinhood Draws User Ire for Repeated Outages in Volatile Market (Wall Street Journal)
Robinhood Brokerage App Goes Down for Second Time in a Week (Bloomberg)
When Your Hip Fintech App Goes Offline Amid a Market Plunge (Wired)

[nativounit]

The system (barely reading between the lines) can lose traders money and could lose them money again, and perhaps again.

The collapse of its trading system is not the only existential threat to Robinhood. Rivals Charles Schwab, TD Ameritrade and E*Trade cut online trading pricing to zero. The Charles Schwab agreed to buy TD Ameritrade, for $26 billion. The two companies combined will have about $5 trillion in assets.

Robinhood now has to make the case for why traders should use it at all. One primary reason has been shattered. A reputation can take years to build but can disappear in a day. For Robinhood, that day has come, in the form of two days, and its future is ruined.

[recirclink id=650309]
[wallst_email_signup]

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.