On February 18, the U.S. House of Representatives Financial Services Committee held a hearing examining what happened during the GameStop Short Squeeze which lasted for several hours. The hearing featured a variety of key players which include Reddit CEO Steve Huffman, Citadel LLC CEO Ken Griffin, Keith Gil the man who kicked off the GameStop stock surge, and Robinhood CEO Vlad Tenev.
Despite having so many people, Tenev was the main target of questioning by over the 50 members of the House of Representatives.
The Hot Seat
The questions lobbed at Tenev varied greatly from grilling him about Robinhood halting the trading of GameStop’s stock to Alex Kearns, a 20-year-old Robinhood user who committed suicide in June 2020 when he thought he had lost $750,000 on the app. Kearns’ family is currently suing Robinhood accusing the company of wrongful death, negligent infliction of emotional distress, and unfair business practices.
Alex Kearns was a 20-year-old student and @RobinhoodApp user who took his own life believing he owed $730,000.
— Rep. Sean Casten (@RepCasten) February 20, 2021
The representatives criticized Robinhood for “gamifing” stock trading referring to the app’s audio and visual cues that cheer the user; however, Tenev responds by saying, “We didn’t encourage anyone to tap on anything… We wanted to give our customers delightful features so they know we’re listening to them…”
Not a Cat
Keith Gill, the man who turned people onto GameStop’s stock, was asked about his YouTube/social media presence and the stock advice that he specializes in. Gill said the reason he shared his investment ideas on social media is that he thought they could help people, and also improve his own understanding of the stock market via critiques he receives.
In his testimony, Gill said giving stock advice is something hedge funds do with their own teams of analysts: “Social media platforms like YouTube, Twitter, and WallStreetBets on Reddit are leveling the playing field.”
As for why Gill chose GameStop, he simply said he liked that stock and saw a lot of potential in it. In June 2019 when he was going through a bout of unemployment, he saw Gamestop’s stock decline below what he thought was a fair value, so he bought call options and would later increase his positions.
Gill remains bullish on the stocks and firmly believes the company’s stock could see a big turnaround, “…as far as I can tell, the market remains oblivious to GameStop’s unique opportunity within the gaming industry.”
The other representatives grilled the CEOs over their actions during the short squeeze. Rep. Alexandria Ocasio-Cortez from New York criticized Robinhood by harping on their shoddy record of outrages and margin requirements being too subdued; even bringing up the idea that Robinhood has “failed to manage [their] own internal risks”.
— Congressman Al Green (@RepAlGreen) February 18, 2021
And Rep. Al Green from Texas cited the fines Citadel has paid over the past 10 years are nothing compared to their revenue stating “Citadel has at least an opportunity to build into its cost of doing business paying penalties… the punishment doesn’t seem to deter Citadel”
Not Over Yet
From the GameStop stock fiasco, Gill earned millions from his initial investment of $53,000. He’s thankful the committee is taking the time to look into what occurred because “it’s alarming how little we know about the inner-workings of the market.”
#GAMESTOP HEARING – VIRAL MOMENT:
— Forbes (@Forbes) February 18, 2021
No giant revelations were discovered during the hearings, but rather further inferred what we already knew. The hearings are not over yet. This is merely the first of several the committee has planned.