GameStop hearing - Updates as Roaring Kitty, and Reddit and Robinhood CEOs testify
Highlights from the Congressional hearing
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Five of the key players in the GameStop stock trading saga appeared before a congressional committee to answer questions about their role in January’s tumultuous market activity.
The House Committee on Financial Services is the first governmental body to call witnesses to testify after retail investors mobilised on Reddit and bought shares in retailer GameStop, sending its stock price rocketing.
Their action sent hedge funds with short positions looking for emergency bailouts and led the stock trading platform Robinhood to pull the plug on future trades of the stock by its users. The share price has since sunk back from a peak of $483 to $45.
At the hearing on Capitol Hill, lawmakers are questioning Robinhood CEO Vlad Tenev, Reddit CEO Steve Huffman, Citadel CEO Ken Griffin, Melvin Capital founder Gabe Plotkin, trader Keith Gill, known “Roaring Kitty”.
Ahead of the hearing, committee head Representative Maxine Waters said in a statement that they will take a hard look at the hedge fund industry’s “long history of predatory conduct”. The committee will also examine Robinhood’s decision to halt trading of GameStop and other “meme stocks”.
CEO of Citadel now giving opening statement
“We had no role in Robinhood’s decision to limit trading in GameStop or the other meme stocks,” says Ken Griffin of Citadel Securities.
CEO of Citadel now giving opening statement
“We had no role in Robinhood’s decision to limit trading in GameStop or the other meme stocks,” says Ken Griffin of Citadel Securities.
Citadel was able to provide liquidity in the week of the GameStop debacle and always will, says Griffin.
Melvin Capital CEO speaks
Founder and CEO of Melvin Capital Gabriel Plotkin says the company had closed out all the positions in GameStop before the trading limits were put in place by Robinhood.
He also says that Melvin Capital was not bailed out but instead that Citadel got in touch to invest.
Mr Plotkin says that when the Reddit in which trades were discussed began to look specifically at Melvin’s investments and trade in the other direction, he was the target of antisemitic slurs.
“Many of these posts were laced with antisemitic slurs directed at me and others. The posts said things like ‘it’s very clear we need a second holocaust, the jews can’t keep getting away with this.’ Others sent similarly profane and racist text messages to me.”
Steve Huffman, CEO of Reddit testifies
Mr Huffman explained the role of moderation in Reddit communities works, with up and down voting on posts, and that there is some centralised content moderation.
“WallStreetBets is one of many finance and investing-related communities on Reddit. This particular community specialises in higher-risk, higher-reward investments than what you might find in other, more conservative, financial communities on Reddit.”
He adds that it is a real community and worth protecting.
He added that they checked activity in WallStreetBets in January and said that they did not see bot or foreign activities and that the group has behaved in the bounds of the Reddit guidelines.
Mr Gill argues that he decided on his own that GameStop was undervalued and might be able to find new revenue streams by moving towards a digital model.
“I like the stock.”
He says that discussing stocks on Reddit is just like discussing stocks in a bar or on a golf course and that his posts didn’t cause movement of Game Stop price.
Shortly after saying this GameStop’s stock price moved sharply upwards.
Jennifer Schulp, Cato Institute
“It is difficult to analyse the impact of the trading in GameStop and other stocks because many facts remain unknown at this time. While the popular narrative is that retail traders rose up to target hedge fund short positions, we do not have the data to know what portion of GameStop’s rise was attributable to retail investor behavior versus the behavior of other market participants. More so, we may never have the data to determine the diverse motivations of all the individual investors who traded in GameStop. “
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