Twelve months ago this week, thousands of retail investors banded together to bid up the stocks of a handful of ailing companies, notably video game retailer GameStop and movie theater chain AMC. The actions sent those shares soaring, booking huge gains on paper and dealing heavy losses to hedge funds and to other professional investors who were betting against the companies.

On Jan. 27, 2021, GameStop hit its record high, closing up nearly 1,800% from just a few weeks before. The so-called meme stock phenomenon had been born, and some said it would signal a permanent power shift on Wall Street.

Robinhood, a commission-free trading app that played a major role in the meme stock phenomenon, is still dealing with the fallout, the DealBook newsletter reports. The company has brought millions of new investors into the markets, many attracted by the heady gains made by traders during the frenzy last January.

But the day after GameStop reached its peak, Robinhood abruptly restricted trading in some meme stocks, claiming that it had been forced to do so by a liquidity crunch, Wall Street rules and clearinghouse limits. The restrictions caused the stocks to plunge, prompting lawsuits, congressional hearings and a Securities and Exchange Commission investigation.

“A new generation turned the act of investing into a mass movement,” Robinhood said in a statement Tuesday about the market events last year. “We never want our customers to be surprised with trading restrictions again,” it added, noting that it had bolstered its risk and compliance infrastructure, among other things. On Wednesday, SEC Chair Gary Gensler put out a brief statement saying that the agency was still working on recommendations to make the market “as fair, orderly, and efficient as possible.”

Robinhood said Thursday that it had lost $3.69 billion in 2021, including a loss of $423 million in the last three months of the year. Revenue in the quarter was up 14%, to $363 million, compared with the same period the previous year. Robinhood made a profit of $13 million in 2020, including $7 million in the last quarter of that year.


“We had a momentous year, nearly doubling the number of customers on the platform and making critical investments in our team and infrastructure to support growth,” Vlad Tenev, co-founder and CEO of Robinhood, said in a news release accompanying the financials. “This year, we’ll expand our ecosystem of products.”

Analysts had expected the company to say it lost more than $300 million in the fourth quarter.

Robinhood’s stock dropped 15% in aftermarket trading Thursday and has lost about two-thirds of its value since it went public this past summer, stoking rumors that it could become a takeover target. Lingering issues from the meme stock rally — and related trading restrictions — have marred the outlook, but the company got good legal news Thursday before reporting its finances.

This month, a 27-year-old truck driver from Connecticut secured from the Financial Industry Regulatory Authority the first arbitration award stemming from Robinhood’s halt of meme stock trading. The $30,000 award is a small sum for Robinhood, which has a market cap of more than $10 billion, but Jorge Altamirano, a lawyer whose firm represented the investor in the arbitration, said he had heard from hundreds of others who said that Robinhood’s actions had led to losses that “represented life-changing money for them and their families.”

Robinhood still faces a proposed class-action lawsuit in Florida that consolidates claims from around the country accusing it of antitrust and securities law violations. (On Thursday, the judge dismissed the plaintiffs’ claims of negligence.) The company had won a motion to dismiss the antitrust claims, but the plaintiffs were allowed to file an amended complaint for that portion of the case; a Robinhood spokesperson said the new filing “doesn’t make their collusion allegations any more plausible.”

Robinhood also may face regulatory scrutiny on payment for order flow, in which the broker sells its trades to big institutions to execute. This key element of its commission-free business model drew attention when trading was halted, raising concerns about conflicts of interest.