> The biggest problem is Robinhood's poor messaging. It's clear their highest priority was to avoid admission that they were running out of money. They didn't w

> The biggest problem is Robinhood's poor messaging. It's clear their highest priority was to avoid admission that they were running out of money. They didn't want to trigger a bank run or shake the confidence of their newly acquired users, so they tried to obscure the message as much as possible. As a result, the popular narrative assumed some sort of evil conspiracy theory. This was my impression too, especially from RH CEO’s interview on Chris Cuomo. He tried to communicate that they were effectively getting margin called, but without explicitly saying it, vaguely referring to SEC and exchange rules and regulations, hoping the audience would read between the lines. But not giving a straight answer just fed the conspiracy theories. In hindsight, considering RH raised $1B additional capital a day or three later [1], it would have been better for him to have just been explicit about it. “Yeah Chris, here’s the problem. As you know RH enables no-fee trading and instant trading the moment you join. We maintain margin accounts with our exchange partners to risk manage this. However, the massive rapid influx of new users combined with the unplanned-for three-sigma increase in volatility in these stocks caused us to hit our margin limits with the exchanges. We’re getting margin called at unanticipated levels and just don’t have the capital buffer. We’re raising additional capital as quickly as we can to fund our margin accounts and re-enable trading, but until that’s accomplished we have no choice but to disable buys on these high-vol stocks. We disabled buys and not sells for two reasons: 1) only buys require margin in our system, and 2) if you think traders are angry when you disable buys, they get even angrier when you disable sells and lock them into a position that could suddenly go against them. To our customers, we’re terribly sorry about this and are working overtime to solve the problem. We’re raising additional capital to increase our margins with our exchanges, and are updating our risk models to better accommodate such black swan events going forward. We’re listening to complaints and suggestions and evaluating additional ideas we hear to improve our service.” Something like that I’m sure WSB would have bought, and eventually forgiven them for. [1]:https://news.ycombinator.com/item?id=25954539 https://news.ycombinator.com/item?id=25954539