Charlie Munger says Robinhood is justly ‘unraveling’ for ‘disgusting’ practices

Berkshire Hathaway Vice Chairman Charlie Munger blasted inventory buying and selling app Robinhood on Saturday, saying the corporate is now “unraveling.”

“It is really easy to overdo a good suggestion. … Look what occurred to Robinhood from its peak to its trough. Wasn’t that fairly apparent that one thing like that was going to occur?” Munger mentioned at Berkshire Hathaway’s annual shareholder assembly Saturday.

Munger lambasted what he characterised as Robinhood’s “short-term playing and massive commissions and hidden kickbacks and so forth.”

Robinhood doesn’t cost customers fee and generates a majority of its income from “fee for order circulate,” the back-end fee brokerages obtain for guiding purchasers’ trades to market makers. 

“It was disgusting,” Munger mentioned. “Now it is unraveling. God is getting simply.”

Robinhood went public final July and shares are down 88% from their August 2021 excessive.

The corporate rose to prominence throughout the pandemic and performed a key position in some large brief squeezes final 12 months, as retail traders flocked to the app to push meme inventory costs greater and inflict ache on brief sellers betting in opposition to the shares.

Munger in February 2021 amid a wild buying and selling rush first criticized Robinhood for its practices, calling the app’s enterprise mannequin a “soiled means of being profitable.”

The corporate on Thursday reported a lower in customers and a wider-than-expected loss for the primary quarter. Earlier within the week, Robinhood introduced it might lower about 9% of full-time workers.

Robinhood responded to Munger’s feedback, saying the vice chairman doesn’t perceive the buying and selling platform.

“It’s tiresome witnessing Mr. Munger mischaracterize a platform and buyer base he is aware of nothing about. … He ought to simply say what he actually means: except you look, assume, and act like him, you can not and shouldn’t be an investor. We’re joyful to share our academic instruments, because it additionally appears he’s misplaced on digital currencies,” Jacqueline Ortiz Ramsay, Robinhood head of public coverage communications, mentioned in an e mail to CNBC.

Munger’s remarks echoed feedback from Berkshire Chairman and CEO Warren Buffett earlier within the assembly ripping on Wall Road for turning the inventory market right into a “playing parlor.”

“Is it smart to criticize folks in any respect?” Buffett requested.

“Most likely not, however I can not assist it,” Munger mentioned.

Take a look at the entire CNBC Berkshire Hathaway annual assembly protection right here.