Market Extra: Robinhood says criticism from Buffett’s right hand man on retail trading ‘overlooks cultural shift’ and is ‘disappointing and elitist’

United States

Robinhood Markets on Thursday fired back at criticism leveled against it a day earlier by Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett’s close partner.

The popular trading platform was “created to allow people who don’t have access to generational wealth or the resources that come with it to begin investing in the U.S. stock market,” said Robinhood spokeswoman Jacqueline Ortiz Ramsay, reiterating the company’s often stated credo about democratizing access to the markets for average investors.

“To suggest that new investors have a ‘mind-set of racetrack [betters]’ is disappointing and elitist. It should be celebrated that we are seeing market investors begin to diversify, and that education and awareness about the values of investing are diffusing further into previously untapped generations,” Ramsay wrote.

The response comes after Munger said, “it’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mind-set of racetrack betters.…It’s a dirty way of making money,” referring to the Robinhood.

Munger was speaking at the Los Angeles-based Daily Journal annual shareholders meeting, which was livestreamed by Yahoo Finance.

The famously plain-spoken Munger’s comments are a reference to the GameStop GME short-squeeze chaos that gripped Wall Street a month ago, as an army of individual investors congregating on social-media platforms like Reddit and Discord, rattled the broader market by upending the short bets of professional investors.

The episode resulted in a hearing last week before the House Financial Services Committee, where Robinhood’s CEO Vlad Tenev defended a decision in late January to temporarily restrict trading in so-called “meme stocks,” including GameStop and AMC Entertainment Holdings AMC.  

GameStop exploded back into the news Wednesday as trading in the stock, which doubled in value on the day, was repeatedly halted. It was seeing turbulent trade again on Thursday.

Markets eventually bounced back from the late January saga, but the epic short squeeze momentarily rattled bullish sentiment, sending the Dow Jones Industrial Average DJIA,  the S&P 500 SPX  and the Nasdaq Composite COMP indexes to their sharpest weekly declines since October.