Billionaire investor Charlie Munger is clearly not a fan of Robinhood. Munger, Warren Buffett’s long-time business partner and the vice chairman of Berkshire Hathaway has lambasted Robinhood at different times, accusing the trading app and similar apps, of encouraging amateur investors to gamble on stocks and dabble with risky options trading.
“It’s just god-awful that something like that would draw investment from civilized men and decent citizens. It’s deeply wrong. We don’t want to make our money selling things that are bad for people,” Munger, 97, said earlier this month at Berkshire Hathaway’s annual shareholder meeting.
Warren Buffett, the CEO of Berkshire Hathaway also criticized Robinhood, saying he’s “looking forward” to reading online broker’s S-1. Robinhood has “become a very significant part of the casino aspect of the casino group that has joined into the stock market in the last year or year and a half,” Buffet said during the conglomerate’s annual shareholder meeting, streamed exclusively on Yahoo Finance.
Buffett, 90, said it “would be interesting to watch” how the commission-free trading app describes its source of income in the S-1, pointing out that Robinhood’s commission-free trading has resulted in a surge in put and call options trading that’s “gambling on the price of Apple.”
“There’s nothing illegal about it. There’s nothing immoral, but I don’t think you’d build a society around people doing it,” Buffett added.
He continued: “If a group of us landed on a desert island knew we would never be rescued and I was one of the group and said, ‘I’ll set up an exchange over here and I’ll trade our corn futures and everything around it,’ I think the degree to which a very rich society can reward people who know how to take advantage, essentially, of the gambling instincts of not only the American public, the worldwide public, it’s not the most admirable part of the accomplishment.”
But Robinhood did not waste time to fire back at the legendary investors via a blog post:
“If the last year has taught us anything, it is that people are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing. And at Robinhood, we’re not going to sit back while they disparage everyday people for taking control of their financial lives.”
Shark Tank investor Kevin O’Leary, however, has a different view from Warren Buffet and Charlie Munger. He called Robinhood a “misunderstood platform.”
“I think what both Warren and Charlie may not have considered is Robinhood, with its 20-plus million accounts, has done a great service for people who never invested in a stock before,” O’Leary added.
Robinhood, which has plans to become a publicly traded company this year, came under heavy criticism and drew Congressional and regulatory scrutiny in the wake of a trading frenzy in February surrounding meme stocks GameStop (GME) and AMC (AMC).
The trading app was also hit with class action lawsuits by customers who accused Robinhood of favoring Wall Street pros over retail investors when it placed temporary trading curbs on those stocks.