Robinhood, a popular trading platform, is nearing the completion of a settlement with investors who filed a lawsuit against the company for halting trades of certain meme stocks, including GameStop, in early 2021. The firm’s attorneys informed a Miami federal court on May 28 that the settlement with the investor group is in the final stages, anticipating an agreement and case dismissal within two weeks.
What Led to the Lawsuit?
The exact terms of the settlement have not been disclosed, and representatives for Robinhood and the investor group have not commented. The lawsuit, led by Blue Laine-Beveridge, alleges that Robinhood’s restriction on certain stocks between January 28, 2021, and February 4, 2021, constituted illegal market manipulation, leading to billions in lost investor equity.
Investors affected by Robinhood’s actions held shares in companies like GameStop, AMC, Bed Bath & Beyond, BlackBerry, Nokia, trivago, Koss, Express Inc., and Tootsie Roll. The lawsuit is part of a larger series of legal actions across the U.S. addressing Robinhood’s conduct regarding meme stocks.
Settlement Developments
This settlement follows a decision by U.S. District Judge Cecilia Altonaga, who denied investors’ motions for class certification twice, once in April and previously in November. This legal hurdle was a significant factor leading to the current settlement negotiations.
Key Points of Interest
Insights for Investors:
- Understand the implications of trading halts on market equity.
- Track legal developments in securities law for potential impacts on trading platforms.
- Monitor the performance and volatility of meme stocks like GameStop and AMC.
- Stay informed about influential traders and market movements driven by social media.
- Evaluate the risks and benefits of engaging in highly speculative stock trading.
GameStop and AMC, often referred to as meme stocks, gained notoriety in early 2021 when social media-driven buying sprees caused their prices to soar. A notable contributor to this phenomenon was Keith Gill, known as Roaring Kitty, whose return to social media in May sparked renewed interest in GameStop, briefly boosting its stock price.
Despite the initial surge, GameStop shares have since declined significantly, closing at $21.24 on May 29, a drop of over 50% from previous highs, and continued to fall in after-hours trading.