- On Thursday afternoon, Congress held a hearing to address the GameStop stock fiasco.
- The hearing featured the CEOs of Robinhood, Citadel, Reddit, and Melvin Capital.
- Robinhood CEO Vlad Tenev was the hearing’s main target, and it was plagued with technical issues.
- Visit the Business section of Insider for more stories.
Just weeks after the GameStop stock bubble popped, the US House of Representatives Financial Services Committee held an hours-long hearing examining what happened.
Though that hearing featured a variety of chief executives, from Reddit CEO Steve Huffman to Citadel CEO Ken Griffin, and even featured one popular financial influencer, the main target of questioning was Robinhood CEO Vlad Tenev.
Questions to Robinhood focused on the app’s decision to halt trading and how it “gamifies” stock trading
With over 50 members of the House of Representatives participating, the lines of questioning varied wildly. Some representatives asked Tenev about Robinhood’s choice to halt trading of GameStop and other such “meme stocks” on January 28, while others asked him about Alex Kearns, a 20-year-old Robinhood user who thought he had lost $730,000 on the app. Kearns died by suicide in June 2020.
“I’m sorry to the family of Mr. Kearns for your loss,” Tenev said.
Kearns repeatedly contacted Robinhood’s help desk, but didn’t receive a response before he died. During his allotted time, Rep. Sean Casten played Tenev the recording that users hear when they call Robinhood for help.
He also criticized Robinhood for the “innate tension” at the heart of its business model, which he said is split “between democratizing finance, which is a noble calling, and being a conduit to feed fish to sharks.”
Lawmakers primarily focused on Tenev due to the stock trading app’s critical role in the explosion of GameStop’s stock value: Between January 20 and January 26, GameStop’s stock value leaped from just over $35 per share to north of $140 per share. By January 27, it hit new highs of over $325 per share – an over 8,000% increase from just a few months ago.
The next morning, Robinhood halted trades of the stock because it ran out of money to cover the upfront cost of its customers stock purchases. The company even had to dilute its own value in order to quickly raise capital – a $3.4 billion investment from several different firms was announced in early February.
Tenev repeatedly told lawmakers the same story he’s told previously: Robinhood was forced to temporarily halt trading of GameStop and several other stocks because the National Securities Clearing Corporation demanded $3 billion to cover volatile trades.
And he refuted claims that the decision was driven by the hedge funds which had taken out short positions on GameStop stock, as did Melvin Capital Management CEO Gabe Plotkin who also joined the hearing.
Another notable criticism repeatedly leveled at Robinhood: Gamification. The app notoriously features audio and visual elements that cheer on user actions. “We didn’t encourage anyone to tap on anything,” Tenev said in one such exchange. “We wanted to give our customers delightful features so they know we’re listening to them and we care about them.”
Technical difficulties persisted throughout the nearly 5-hour hearing
From the very beginning of the hearing, technical issues plagued the video conference. Hot mics were frequent, and a few major sound issues caused pauses.
As the hearing – which kicked off at noon – pushed on, exchanges between legislators and interviewees got more and more brief.
Legislators frequently cut in mid-answer with “I’ll reclaim my time” in an effort to squeeze another question in. And an exchange between Rep. Rashida Tlaib and Citadel CEO Ken Griffin just after the five-hour mark got particularly contentious, as he attempted to talk over her. “Let me finish my answer. I think it’s important,” he said. “No, no,” Tlaib responded.
The few exchanges with Keith “Roaring Kitty” Gill, a stock trader who made a name for himself as a YouTuber, were largely focused on what he specializes in: stock advice. Gill said he would still buy GameStop stock at its current value, and that he initially bought in months ago because it was “undervalued.” Also of note: Gill’s opening statement included at least one notable meme reference.
Ultimately, there were no huge revelations about the GameStop stock bubble or the major players involved in it from Thursday’s hearing. It’s the first of several such hearings that the financial services committee plans in the wake of the bubble’s popping.
You can watch the full hearing below:
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