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When Robinhood went dark

March 03, 2020
Fully Charged
Bloomberg

Hi all, Julie here. Unless you were vacationing on a remote island last week, you probably heard that stocks got crushed. In fact, it was the worst week for the S&P since 2008. So it's safe to say that on Monday, traders were anxious. A lot of people probably went into their brokerage accounts ready to make a trade or two. But for Robinhood Markets Inc. customers, that wasn't an option.

Right around the time that the market opened, Robinhood's site went down. All trades—stocks, options, Bitcoin and otherwise—were out of commission. The outage lasted the entire New York trading day.

The timing, of course, couldn't have been worse. Trading volume has been up since the coronavirus panicked markets, and on Monday the S&P 500 finally gained after big declines. But as the market rallied, any Robinhood customers who had wanted to jump in just as things were getting better were shut out.

The outcry on social media was swift and intense. Users of the platform, which made a name for itself letting people buy and sell stocks for free on a mobile app, blasted the company on Twitter and Reddit. "I am missing out on over $100k on this market swing! This is completely unacceptable and I hope @RobinhoodApp gets a huge class action lawsuit,'' one user wrote. "They've had issues nearly every morning for the last couple of weeks. If they cared, they would have had this resolved long ago," another said.

In many cases, the stories are painful. One reader emailed that he had planned out a strategy of puts and calls for the morning, aiming to bet on a market rally, but was unable to make any trades thanks to the outage. Instead, he was forced to watch his put options lose him money as the market gained. Now, he said, he's switching platforms. 

Even if users don't put together a lawsuit (a Twitter account called "Robinhood Class Action" now has more than 4,400 followers), the outage is bad news for the startup. It wasn't that long ago that Robinhood was pretty much the only game in town when it came to free trading. Now, that's hardly the case. Charles Schwab Corp., Jack Dorsey's Square Inc. and Fidelity Investments offer commission-free trading, to name a few. After an outage like the one Robinhood customers experienced, it's easier than ever for customers to take their business elsewhere. —Julie VerHage

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