Robinhood, hedge funds and small investors testify before Congress in GameStop affair
GameStop’s share price has dropped by 90% again, but the affair is going to the next round in the parliamentary finance committee.
Several top executives from the companies involved in the affair involving the stock of video game retailer GameStop, as well as some small Bitcoin Benefit investors involved who conspired on the social network to collectively buy the stock, are now expected to testify before the US House Finance Committee.
According to a Reuters report, the CEOs of trading platform Robinhood, investment firm Melvin Capital and hedge fund Citadel are expected to be asked to appear at the parliamentary hearing on 18 February. According to Bloomberg, it is already confirmed that Citadel founder Ken Griffin and Robinhood CEO Vlad Tenev will testify, though it is unclear whether Melvin founder Gabriel Plotkin or another member of the hedge fund’s board will appear.
Robinhood and retail investors on Reddit
The hearing, which will be held in virtual form due to the Corona crisis, will look at the developments surrounding GameStop’s stock, which were largely triggered by the aforementioned investment firms and hedge funds, trading platform Robinhood and retail investors on Reddit. After the latter drove the security to disproportionate heights, massive losses were incurred by Melvin and Citadel, after which Robinhood halted trading in GameStop’s stock. Some politicians see possible market manipulation in this move, which is why the trading platform in particular immediately came under criticism.
This criticism was reinforced by the fact that Robinhood has financial ties to Melvin and Citadel. Media and observers interpreted the trading halt accordingly as kowtowing to high finance to the detriment of small investors. CEO Tenev, however, countered that the capital requirements for trading the stock became too high for his company due to its dramatic price increase, which is said to be the real reason for the halt.
Although the restrictions were later lifted, GME’s share price has since crashed from its temporary high of US$469.49 on 28 January to just US$49.50.