Shark Tank investor Kevin O’Leary may agree with billionaire investor Warren Buffett, and his right-hand man, Charlie Munger, on a number of things. The trading app Robinhood, isn’t one of them.
The chairman of O’Shares ETF told Yahoo Finance Live, “I have ultimate respect for Charlie Munger. I’m a huge fan of his philosophy of investing. That doesn’t mean I can’t disagree with him on an issue like this.”
At Berkshire Hathaway’s annual shareholder meeting in May, Munger tore into Robinhood, accusing the trading app, and others like it, of encouraging amateur investors to gamble on stocks and dabble with risky options trading.
“It’s just god-awful that something like that would draw investment from civilized men and decent citizens. It’s deeply wrong. We don’t want to make our money selling things that are bad for people,” Munger said.
The online broker that is wildly popular with Reddit-fueled day traders and other retail investors snapped back on a blog post saying:
“If the last year has taught us anything, it is that people are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing. And at Robinhood, we’re not going to sit back while they disparage everyday people for taking control of their financial lives.”
O’Leary called Robinhood a “misunderstood platform.”
“I think what both Warren and Charlie may not have considered is Robinhood, with its 20-plus million accounts, has done a great service for people who never invested in a stock before,” he added.
Robinhood, which has plans to become a publicly traded company this year, came under fire and drew Congressional and regulatory scrutiny in the wake of a trading frenzy in February surrounding meme stocks GameStop (GME) and AMC (AMC).
The trading app was also hit with class action lawsuits by customers who accused Robinhood of favoring Wall Street pros over retail investors when it placed temporary trading curbs on those stocks.
O’Leary said he spoke with Robinhood’s co-founder and CEO Vlad Tenev to offer “moral support” shortly before he testified before Congress.
“[Vlad] actually has built a very thoughtful platform,” O’Leary said. “He’s trying to make it safe for the first-time investor.”
Tenev still has some convincing to do when it comes to regulators.
In testimony before the House Financial Service Committee Thursday, the new U.S. Securities and Exchange Commission Chairman Gary Gensler raised concerns about Robinhood and its “game-like features” — such as points, rewards, leaderboards, and competitions to increase user engagement.
Gensler has directed his staff to request public input on new rules that could set boundaries on what sorts of features online brokers like Robinhood can employ.
In prepared testimony, Gensler said, “Many of these features encourage investors to trade more. Some academic studies suggest more active trading or even day trading results in lower returns for the average trader.”
Whether you’re a fan of Robinhood or not, it’s certainly made the Wall Street pros stand up and take notice.
“I don’t think Robinhood is going away,” O’Leary said. “I have a Robinhood account, Reddit account, I ride with the herd. We’re very careful when we put a hedge on the short side that it doesn’t become a target of the herd, because you can lose a lot of money that way.”
Alexis Christoforous is an anchor at Yahoo Finance. Follow her on Twitter @AlexisTVNews.