Robinhood (HOOD) has agreed to settle with customers who took it to court after its investment app suffered service outages, according to a Reuters report. Robinhood’s app lets people trade stocks, cryptocurrencies, and other investment products, often without trading fees. It is a popular trading platform for retail investors.
In March 2020, Robinhood users experienced service outages for a number of days that made them unable to trade. The disappointed customers decided to sue Robinhood, accusing the company of breach of contract and negligence. Among other claims, the customers alleged the outages caused them to lose money by denying them the ability to trade. The users sought damages in a class-action lawsuit.
Settlement Amount
Robinhood plans to seek court approval of its settlement agreement with the customers in about two months. However, the settlement amount Robinhood will pay to its customers remains unknown. The company finished Q1 2022 with $6.2 billion in cash.
Wall Street’s Take
Robinhood has a Hold consensus rating based on four Buys, five Holds, and three Sells. The average Robinhood price target of $13.66 implies 36% upside potential to current levels.
Blogger Opinions
TipRanks data shows that financial blogger opinions are 53% Neutral on HOOD, compared to a sector average of 66%.
Key Takeaway for Investors
Lawsuits can distract management and divert resources, potentially causing delays on important actions that can drive long-term benefits for investors. Settling the customer’s lawsuit could free Robinhood’s management, who can then focus on more important development programs. Thus, getting the issue out of the way could also relieve some pressure on HOOD stock.
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