WASHINGTON – The GameStop saga has been portrayed as a victory of the little guy over Wall Street giants but not everyone agrees, including some lawmakers in Washington.
GameStop shares soared 1,600% in January before falling back to earth. Entangled in the drama are massive short-selling hedge funds, a social media message board and ordinary investors wanting in on the hottest new trade, among others. The House Financial Services Committee is ready to dig into the confounding episode at a hearing on Thursday.
The players include a swaggering 34-year-old YouTube personality and GameStop evangelist; one of the richest and most prominent investment tycoons; and the CEO of the online platform Robinhood that hosted a tsunami of speculative GameStop trading but faced intense criticism for restricting trading at the height of the frenzy.
The CEO, Vlad Tenev, is denying speculation from some lawmakers that Robinhood acted to favor its big Wall Street clients when it blocked customers on Jan. 28 from buying shares of GameStop and a dozen other companies. The restrictions lasted in some form for days.
The accusation is that Robinhood changed the rules of the road midway through to favor big clients that stood to lose money if GameStop shares kept rising.
“Any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric," Tenev says in written testimony prepared for the hearing. “Our customers are our top priority."
Tenev reiterated Robinhood's position that it imposed the trading restrictions solely to meet capital requirements set by regulators.
As they question Tenev and other witnesses, lawmakers and regulators will look for answers about what the GameStop trading frenzy says about the fault lines and potential conflicts in the structure of the market that can hurt unsophisticated investors.