late January as traders in the that wagered the video game retailer would fail. GameStop shares jumped briefly to more than , and . The market volatility caught the .
On Thursday, the House Committee on Financial Services is holding a virtual hearing, titled Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide. The chief executives of Reddit, Robinhood, Citadel and Melvin Capital will be in attendance, along with the Reddit poster who spearheaded the GameStop buying frenzy and is now .
Here’s how to watch the hearing and some background on what led to Congress getting involved.
When is the hearing?
The House Committee on Financial Services will hold the hearing on Thursday, Feb. 18 at 9 a.m. PT/ 12 p.m. ET.
Where can I watch the hearing?
CNET will stream the hearing on our YouTube channel.
The livestream will be available on the House Committee on Financial Services’ YouTube channel. C-Span will also carry the hearing.
Why is there a hearing?
During the week of Jan. 25, subreddit r/WallStreetBets. Those who bought shares of the video game retailer early were seeing huge returns.saw their share prices increase suddenly and dramatically. Taking credit was a group of traders on the
On Jan. 28, popular trading app Robinhood said it would, though it did allow stocks to trade again the next day. The move provoked a swift backlash from customers and lawmakers.
Several members of Congress, including Rep. Alexandria Ocasio-Cortez, Rep. Rashida Tlaib and Sen. Ted Cruz, called for a hearing on Robinhood’s actions. On Feb. 3, Rep. Maxine Waters, a Democrat from California and the chairwoman of the House Committee on Financial Services, told Cheddar there would be a hearing to investigate what happened.
“Addressing that predatory and manipulative conduct is the responsibility of lawmakers and securities regulators who are charged with protecting investors and ensuring that our capital markets are fair, orderly, and efficient,” Waters said in a Jan. 28 statement. “As a first step in reining in these abusive practices, I will convene a hearing to examine the recent activity around GameStop stock and other impacted stocks with a focus on short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.”
Who is going to be at the hearing?
The witness list includes CEOs of the companies that were handling the trades as well as the Reddit trader who led the charge on the GameStop buying spree.
Keith Gill is a poster on the stock trading subreddit r/WallStreetBets and runs the Roaring Kitty YouTube channel. Back in September 2019, he started posting monthly GME YOLO updates reflecting his certainty that GameStop stock was undervalued. He’s been viewed as a hero on the subreddit for starting the buying spree for GameStop, but his posts and videos caught the attention of both the House committee and regulators. Massachusetts regulators sent a subpoena to Gill on Feb. 8 to answer questions about his trading activity, according to the Boston Globe. Gill has also been .
“I did not solicit anyone to buy or sell the stock for my own profit,” he said in a written testimony posted Wednesday. “I did not belong to any groups trying to create movements in the stock price. I never had a financial relationship with any hedge fund. I had no information about GameStop except what was public. I did not know any people inside the company, and I never spoke to any insider.”
Steve Huffman is the co-founder and CEO of Reddit. The r/WallStreetBets subreddit was the headquarters for all the “meme” stock trading and grew in size to more than nine million subscribers.
Vlad Tenev is the CEO of Robinhood, the popular investing app used by many people who partook in the buying frenzy. On Jan. 28, his company tweeted that it wouldn’t allow any users to. This caused a backlash, and questions arose about why this happened. Tenev did multiple interviews during the following days, but it wasn’t until he spoke with Tesla CEO Elon Musk on the voice chat app Clubhouse that he gave more details on what happened. Tenev said regulators informed his company it would need to have $3 billion on hand as collateral for trades. Since it didn’t have the money, the investing app had to freeze the buying of shares until it secured more money to allow limited trading on Jan. 29.
Kenneth Griffin and Gabriel Plotkin are the CEOs of hedge fund companies Citadel and Melvin Capital, respectively. In this event, Melvin Capital would be considered the opposition to the r/WallStreetBets traders. The hedge fund expected GameStop share price to continue to fall so it initiated a short sell, which is essentially a bet that the stock will be at a lower price sometime in the future. Due to the Reddit traders increasing the value of the video game retailer’s stock price, Melvin lost 53% of its investments in January, which translates to billions of dollars. In a written testimony, Plotkin says his firm “played absolutely no role” in the decision made by Robinhood and other trading platforms to suspend trading GameStop stock and that Melvin Capital closed its position in the retailer’s shares days before.
Citadel is an investor in Melvin Capital and helped it out after the big losses last month, although Plotkin says it wasn’t a bailout in his written testimony. Robinhood also has ties to Citadel. When app users buy shares of a company, Citadel pays Robinhood to fulfill these orders, in what’s known as a Payment for Order Flow, or PFOF. This allows Robinhood to let users trade stocks without having to pay any fees. There have been questions about whether this relationship was the reason for the stoppage of trading on Jan. 28, although the hedge fund denied this.