By John McCrank
NEW YORK (Reuters) - Robinhood, a retail brokerage popular with young investors, shot back on Thursday against criticism of the current "meme" stock frenzy by investor Warren Buffett's longtime partner Charlie Munger, who compared the action to betting on horse races.
"It's really stupid to have a culture" encouraging gambling in stocks, Munger said on Wednesday. He called frenzied speculative buying "a very dangerous way to invest."
Robinhood said comparing the mindset of new investors to that of racetrack bettors was "disappointing and elitist."
"In one fell swoop an entire new generation of investors was criticized and this commentary overlooks the cultural shift that is taking place in our nation today," the company said via Twitter https://twitter.com/RobinhoodApp/status/1364976883411034114.
Robinhood was referring to the wave of retail traders entering the market over the past 18 months as many big brokers eliminated trading commissions, a model Robinhood helped pioneer, and more people stuck at home during the pandemic took up day trading.
Representatives for Robinhood and Munger were not immediately available for comment.
GameStop Corp (NYSE:GME) stock skyrocketed in late January after amateur investors encouraged each other online to buy the gaming retailer on platforms including Robinhood. This caught some hedge funds in a short squeeze. The shares later fell, exposing many retail investors to losses, but soared again on Wednesday.
Robinhood has more than 13 million users with an average age of 31, according to the company's most recent public statistics.
Many users criticized the brokerage after it, along with several other brokerages, temporarily restricted trading in GameStop and other "meme" stocks on Jan. 28, due to increased regulatory collateral requirements.
Robinhood Chief Executive Officer Vlad Tenev was slammed at a Feb. 18 congressional hearing for what some lawmakers said was his firm's "gamification" of stock trading on mobile phones through things like virtual confetti following a big trade.
"We don't believe in gamification," Tenev said.