The UK launch of Silicon Valley stock trading app Robinhood could potentially be delayed again as the company faces more criticism following the recent suicide of one of its customers.
The trading app, which was set up in 2013 and offers users the opportunity to trade stocks and options commission-free and without account minimums, has seen its popularity surge in recent years, leading to a ballooning market value of around US$8.3bn at its last funding round in May.
The app is currently not available in the UK, and plans to launch it in the British market in early 2020 were derailed after stock market volatility caused by the coronavirus led to frequent trading outages as a surge in customer interest overwhelmed its servers. The app added around 3mln users in the first quarter of the year.
However, the group now faces an additional reputation threat after a Forbes report revealed that 20-year old US college student Alexander Kearns committed suicide in June after the app displayed a loss to his account of around US$730,000, however it later came to light that the figure may not have represented the actual losses but rather a temporary balance until the stocks underlying the options had settled in the account.
A New York Times report earlier this week also reported claims from another Robinhood user, US navy medic Richard Dobatse, that he had lost US$860,000 using the app in March during an outage.
The outage complaints, which have already resulted in consumer lawsuits, and the ethical damage of seemingly allowing individuals with little knowledge of the financial products they are trading to take on massive amounts of leverage, may mean UK consumers have to wait a little longer to get their hands on the app.
However, Robinhood’s extended absence in the UK market will be good news for its London -listed rivals such as IG Group PLC (LON:IGG) and Plus500 Ltd (LON:PLUS), both of which have seen there shares rise during the volatile period.
While IG and Plus500 are heavy-hitters in their own right, with market caps of around £3.1bn and £1.4bn respectively, they are still overshadowed by Robinhood, which would land squarely in the FTSE 100 if it decided to list in the UK with a market cap of around £6.6bn at its current valuation.
Criticism of Robinhood also comes amid wider concerns that the popularity of retail investing, where non-professional investors buy and trade financial products, is increasingly having to be factored in by investment analysts when forecasting how markets and stocks will move.
A report on June 18 by ING also said that retail investors had spread their speculation into the foreign exchange markets, although they said the current impact of these traders on currency volatility was “marginal”.