Robinhood allegedly auto-selling GME shares for some users

Some Robinhood users are reporting that their GME shares were auto-sold today with no option to cancel the order. Robinhood is one of the most popular retail stockbrokers and is under after recent events. Many users are wondering whether their GME shares are safe from the Robinhood auto-sell function after the scandal that’s developed around the company halting purchases of the stock.

Why is Robinhood auto-selling GME shares?

A screenshot of an email is making the rounds on social media showing that Robinhood auto-sold a user’s GME shares. The text reads:

Important Information About Your Robinhood Account

“Hi (user)

In light of recent volatility, we are restricting transactions for certain securities to position closing only. However, due to the unreasonable risk involved in brokering your position, we have closed your 4,500 shares of GME for an average price of $118.93 on January 28th, 2021 at 11:24 AM.

Your trade confirmation will be available in your order history on Robinhood in one trading day.

If you have any questions, please visit our Help Center and we’d be more than happy to help!

– The Robinhood Team”

While this image has been shared a lot, we haven’t been able to confirm its veracity. Looking at it, it might seem incredulous to most that Robinhood could auto-sell someone’s shares against their will. However, there are circumstances in which this is possible and perfectly legal.

If shares are bought on margin, it’s acceptable for a broker to auto-sell volatile shares if they dip below the point that an investor would be able to remain solvent. When investors buy on margin, they’re fronting part of the money for a buy, and the broker is lending the remainder.

If a user had their GME shares auto-sold on Robinhood today, it’s possible that it was because the stock dipped below a certain level, triggering an alarm. Since Robinhood assists in buying on margin, this alarm would have triggered a sell so the company didn’t lose its part of the investment.

Robinhood GME shares should be safe for those that paid full price for their buys. However, with so much money on the line, anything could happen with a situation this volatile.