Following the market turmoil involving so-called “meme” stocks trading on Robinhood, Bloomberg Law’s June Grasso turned to partner David Bissinger for his take on the many lawsuits already on file and regulatory investigations that will likely occur as a result of the unusual market events of late January and early February.
Bissinger disagreed with the common perception in the media that the story was about “the little guys purportedly winning” and “the big shots getting their noses bloodied.”
As Bissinger explained, “I think it would be a mistake to assume that the long side, the purchasers, of GameStop are entirely these small investors. I think it is much more likely that there are other hedge funds quietly behind the scenes letting the Reddit guys take all the publicity while the hedge funds profit from Melvin’s misery, because hedge funds love beating each other up. They tear their faces off every day. This is just a public example of something that has been going on since trading began.” Subsequent reporting already has begun to confirm Bissinger’s view.
Regarding the lawsuits investors filed against Robinhood for allegedly breaching their agreements by imposing trading restrictions, Bissinger explains that the trading restrictions exist to avoid the insolvency of broker-dealers in situations of extreme market volatility such as this. He observed, “to say these retail traders have a fundamental right to drive up the stock way up beyond any rational corporate valuation mistakes the purpose of the stock market.” As to the likely outcome of those lawsuits, Bissinger projected that “they will die a slow and painful death,” whether in arbitration, individual court actions, or consolidated before a multidistrict litigation court.
Listen to the full Bloomberg Law Podcast episode “Robinhood Lawsuits Face Uphill Battle” here.