May 1, 2021 - Economy

Warren Buffett denounces SPACs and Robinhood at Berkshire Hathaway meeting

Philanthropist Warren Buffett  during the Forbes Media Centennial Celebration at Pier 60 on September 19, 2017 in New York City.

Warren Buffett during a 2017 event in New York City. Photo: Daniel Zuchnik/WireImage

Warren Buffett called SPACs a "killer" and criticized stock-trading app Robinhood for encouraging gambling during Berkshire Hathaway's annual meeting in Los Angeles Saturday.

Why it matters: The criticism by Buffet comes as SPACs, or special purpose acquisition companies, and Robinhood have been facing scrutiny from regulators after soaring in popularity over the past year.

What they're saying: Buffett said at the event that SPACs "won't go on forever, but it's where the money is now and Wall Street goes where the money is."

  • "SPACs have been working for a while and if you secure a famous name on it you could sell almost anything," Berkshire Hathaway's chair and chief executive said.
  • Buffett's longtime lieutenant Charlie Munger called SPACs "a moral failing." "It's not just stupid, it's shameful," he added.

On Robinhood, Buffet said there is "nothing illegal to it, there's nothing immoral, but I don't think you build a society around people doing it." He said it was "taking advantage of the gambling instincts of society, and it isn't admirable."

  • The 90-year-old investor said he was looking forward to reading the company's public offering filing.
  • "It's become a very significant part of the casino group that has joined into the stock market in the last year or year and a half," Buffett said.
  • Munger said it's "deeply wrong" and "god awful that something like that brought investments from civilized men and decent citizens."

The other side: "There is an old guard that doesn’t want average Americans to have a seat at the Wall Street table so they will resort to insults," Robinhood said in an emailed statement.

  • "The future is diverse, more educated and propelled by engaging technologies that have the power to equalize. Adversaries of this future and of change are usually those who've enjoyed plentiful privileges in the past and who don’t want these privileges disrupted.
  • "Their criticisms are unfortunate but they prove why Robinhood’s mission is in fact critical.
"The new generation of investors aren't a 'casino group.' They are tearing down old barriers to investing and taking control of their financial futures. Robinhood is on the right side of history."
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