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Robinhood Is Disgusting Says Charlie Munger

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In the past year, Charlie Munger’s opinion of Robinhood Markets Inc. hasn’t changed. It has, if anything, become more pessimistic.

Berkshire Hathaway Inc.’s vice chairman slammed the trading platform in front of thousands of shareholders at the company’s annual meeting in Omaha, Neb., on Saturday. He claims that after coming public in July 2021, Robinhood has lost ground.

“It was pretty obvious that something like that was going to happen,” Mr Munger said, during a question-and-answer session with Warren Buffett, Berkshire Hathaway’s chief executive and chairman. 

“All the short-term gambling and big commissions and hidden kickbacks and so and so on. It was disgusting,” Mr Munger said.

Mr Munger has previously attacked Robinhood. In an interview with The Wall Street Journal in February 2021, he compared the platform to racetrack betting and said it was highly speculative. 

“And now they’re unravelling. God is getting just,” Mr Munger said. 

His remarks come just two days after Robinhood reported a 43% drop in first-quarter sales to $299 million, compared to the same period last year. It was the company’s fifth straight quarterly decline.

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Last week, the online trading app, which claims to offer a commission-free experience, announced that it would lay off 9% of its full-time employees. 

Mr. Munger’s most recent comments were met with a retort from Robinhood’s head of public policy, Jacqueline Ortiz Ramsay.

“It is tiresome witnessing Mr. Munger mischaracterize a platform and customer base he knows nothing about,” she said in a written statement. “He should just say what he really means: unless you look, think, and act like him, you cannot and should not be an investor.” 

Her statement over the weekend resembled her response more than a year ago, when Mr. Munger began slamming Robinhood for enabling and profiting from the January 2021 individual-investing boom.

“In one fell swoop an entire new generation of investors has been criticized and this commentary overlooks the cultural shift that is taking place in our nation today,” she said at the time. 

During the Covid-19 outbreak, Robinhood attracted millions of investors. It is now trying to keep them. The number of monthly active users on the platform declined 10% in March compared to the same month the previous year.

Instead of charging brokerage fees, the company relies on trade volume to generate revenue. In a practice known as payment for order flow, it delivers customer orders to high-speed trading firms in exchange for cash.. 

On Friday, Robinhood’s stock dropped 2.8 percent to $9.81. This year, the stock has lost approximately 47% of its value.

Mr. Buffett questioned Munger about being so overtly critical, to which Munger replied, “Probably not. But I can’t help it.”