In late January 2021 GameStop went from about $20 to $483 and back down. On January 28, Robinhood stopped its customers from buying the stock while still letting them sell. On February 18, the committee heard from the chief executive of Robinhood, the founder of Citadel, the manager of the hedge fund that had shorted GameStop, and Keith Gill, the individual investor known online as Roaring Kitty.
Gill introduces himself
GillThank you, Chairwoman Waters, Ranking Member McHenry, and members of the committee. I'm happy to discuss with the committee my purchases of GameStop shares and my discussions of their fair value on social media.
GillIt is true that my investment in that company multiplied in value many times. For that, I feel enormously fortunate. I also believe the current price of the shares demonstrates that I've been right about the company.
GillThere are a few things I am not. I am not a cat. I am not an institutional investor. Nor am I a hedge fund. I do not have clients and I do not provide personalized investment advice for fees or commissions. I'm just an individual whose investment in GameStop and posts on social media were based upon my own research and analysis.
GillI grew up in Brockton, Massachusetts. My family was not wealthy. My father was a truck driver and my mom was a registered nurse. I was one of 3 kids, and the first in my family to earn a 4-year college degree when I graduated from Stonehill College in 2009.
GillI also want to say that I support retail investors' right to invest in what they want, when they want. I support the right of individuals to send a message based on how they invest.
GillAs for me, I like the stock. I'm as bullish as I've ever been on a potential turnaround for GameStop, and I remain invested in the company.
GillThank you. Cheers, everyone.
[Hearing transcript, February 18, 2021, opening statement of Keith Gill.]
Tenev’s opening
TenevFirst, Robinhood Securities put the restrictions in place in an effort to meet increased regulatory deposit requirements, not to help hedge funds. We don't answer to hedge funds. We serve the millions of small investors who use our platform every day to invest.
TenevSecond, Robinhood immediately secured additional funds. Altogether, through capital raising and other measures, we've increased our liquidity by more than $3 billion to cushion ourselves against increased collateral requirements and related market stress in the future.
TenevDespite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us. To our customers, I'm sorry, and I apologize. Please know that we are doing everything we can to make sure this won't happen again.
TenevThe existing 2-day period to settle trades exposes investors and the industry to unnecessary risk. There is no reason why the greatest financial system in the world cannot settle trades in real time.
[Hearing transcript, February 18, 2021, opening statement of Vlad Tenev.]
Why the buy button went off
Ranking Member McHenry went first to the decision itself.
McHenrySo, let's take a step back here. You get a call in the middle of the night, according to what I've heard you say in interviews, and based on that conversation with your compliance team, you decided to halt the buying of GameStop stock.
McHenryPeople were furious. We'll get into the regulations and the settlement parts of that today. We will get to that. But this is what I think needs to be answered about your decision. Why did Robinhood restrict the buying but not the selling of GameStop? And why did folks get locked out on the buy side only?
TenevThe decision to restrict GameStop and other securities was driven purely by deposit and collateral requirements imposed by our clearinghouses.
TenevMoreover, preventing customers from selling is a very difficult and painful experience, where customers are unable to access their money. So, we don't want to impose that type of experience on our customers unless we have no other choice.
TenevAnd even though I recognize that customers were very upset and disappointed that we had to do this, I imagine it would have been significantly worse if we had prevented customers from selling.
McHenryOkay. So to that, to this greater point of what happened that day and the model that you're using, let's be crystal clear. That decision you made to restrict the buying but not the selling of GameStop was based--was it based on pressure from anyone on the witness panel here today?
TenevNot at all. Zero pressure from anyone. It was a collateral depository requirement decision made by our Robinhood Securities president, and we stand by it.
[Hearing transcript, February 18, 2021, questioning by Rep. McHenry.]