An investment frenzy that generates controversy and risk
The young generation’s sudden enthusiasm for investment has not failed to stir up resounding controversy in the face of the risks incurred by these millennials with no real experience of the stock market. Although they are presented in an intuitive and entertaining way, the transactions remain very real, as do the potential losses or gains generated, even though the financial products on offer are not limited to shares alone: options, CFDs, and other leveraged investments are accessible in just a few clicks, without users being aware of the risks involved. Some people, developing a form of addiction, have quickly swallowed up all their savings, suffering a loss without making a profit!
In addition, faced with the influx of new users, Robinhood experienced certain problems, including technical bugs, that led to downtime that could last several days, making all operations impossible. These malfunctions sometimes had dramatic consequences, such as during the summer when a 20-year-old student killed himself after noticing that his account showed a negative balance of -$730,000 … while a few days later, this balance turned out to be the consequence of a technical error related to transactions not yet accounted for: the account was actually positive! Following the setbacks encountered with the trading application, users did not hesitate to go directly to Robinhood headquarters to confront the teams. Since then, armored windows have protected the entrance to the start-up’s headquarters in California.
In addition to the potential problems related to the investment choices made by these Y and Z generation traders, the interactions of their community on trading applications may also have increased the volatility of the markets and of certain securities. For example, paradoxically, Hertz shares rose 800% a few weeks after the company was declared bankrupt in May 2020. It turns out that these shares were among the most popular shares on Robinhood, held by more than 160,000 users.