Robinhood CEO admits his mistake in GameStop’s move

Tags: United States, social networks

Does Robinhood CEO come out to defend GameStop? Robinhood, the application of trading Most popular with young users, it was involved in one of its biggest crises on January 28, when it restricted the purchase of shares in GameStop Corp.

  • It was at the end of January when Robinhood experienced one of its most critical events, restricting the purchase of GameStop shares.
  • Now, the executive director of the company, Vlad Tenev, has come out to admit his mistake and point out the actions he may have taken in the situation that occurred on January 28.
  • According to Tenev, he was unable to communicate effectively with his clients, and stressed that the measures taken were “necessary”

According to Reuters, Robinhood, the trading Most popular among Reddit users and young investors, it has come out to declare that, although the measures taken on January 28 were “necessary”, the company did incur some communication errors.

In this regard, the CEO of the company assures that he could have followed better protocols to ensure that communication with his clients was more effective.

Vlad Tenev, CEO of GameStop, stated in an interview with Jason Calacanis and Chamath Palihapitiya that “Without a doubt, we could have had better communication with our customers.”

Calacanis, a long-time investor in Robninhood, was against decisions made by Tenev last month when it restricted the purchase of GameStop shares.

It will be on February 18 when Tenev will appear before the House Financial Services Committee of the United States, where he will present his testimony regarding the riots that occurred and the role that Robinhood had in them; In addition to Tenev, the CEOs of Citadel Securities, Melvin Capital and Reddit will be called to testify.

The main annoyance occurred when, on January 28, Robinhood restricted the purchase of certain shares that presented a significant increase; among these was GameStop, whose shares increased by more than 1,600%.

The decisions made by GameStop were based on the fact that investors coordinated on sites like Reddit and WallStreetBets to raise prices and force hedge funds like Melvin to take a more promising course.

For Tenev, the restrictions implemented were totally necessary, due to a significant increase in deposit requirements.

According to the executive, “As soon as the emails were sent, conspiracy theories started to surface, and my phone was ringing and they were saying ‘how can you do this, how can you side with the hedge funds?”

creenshot of Robinhood Markets, Inc.s mobile app Robinhood
Photo: Shutterstock

What caused the problem between Robinhood and GameStop?

Asked why the decision was made to ban the purchase of shares, Robinhood, one of the most popular apps among young investors, explained in detail why the sudden commercial success of GameStop, driven by social networks, was a risk to Robinhood.

Robinhood outraged many of its users when on January 28 it restricted the purchase of 13 stocks short, including those of GameStop, whose shares had risen more than 1,600%.

“We certainly could have communicated this a little better to customers,” company CEO Vlad Tenev said late Friday.

As noted above, Tenev will still have to declare to the authorities all the details related to the event, the reason for its decisions and the way in which it will proceed so that they do not happen again.

The moves were due, in part, to investors joining forces at sites like Reddit’s WallStreetBets to come up with a strategy that would help drive prices up, resulting in hedge funds like Melvin shedding their bearish positions.

Tenev’s position was clear: the restrictions were necessary, and they were not implemented randomly. The restriction was due to a sudden increase in deposit requirements by a post-trade regulator; however, this data was not specified in the emails that were sent to Robinhood’s clients.

Shares of GameStop and AMC Entertainment plunged Thursday as online brokerages Robinhood Markets Inc and Interactive Brokers restricted trading in various securities encouraged from social media that soared this week.

The increase in operations shocked the stock markets, mainly in the United States, due to the sharp rise in shares loaded with short positions and their subsequent liquidation. AMC shares, for example, were down 60%, while GameStop was down 23%. The major Wall Street indices were trading higher.

GameStop, the video game retailer whose growth of 1,700%, initially climbed to more than 480 dollars per share; this, according to data from Refinitiv. In its last trades it was trading at $ 265.

Dennis Dick of Bright Trading LLC in Las Vegas told the media that “Robinhood’s ban on those stocks has ended (the rise),” adding that “Everyone is trying to hit the exit button at the same time. When you start to scare all the short sellers, there is no one to hold prices at bay anymore. “

Robinhood also restricted operations at BlackBerry, Koss and Express, citing their “recent volatility”, a fact that drew criticism from minority investors, celebrities and some politicians.

On Twitter, some users complained about the measures implemented, even ensuring that trading platforms are protecting only the interests of Wall Street, causing serious damage to smaller investors.

Source: Reuters / Millennium

GameStop stock rally on Robinhood app due to Reddit wallstreetbets subreddit
Photo: Shutterstock

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