It's a battle like never before, with ordinary social media users taking on some of the biggest names on Wall Street. Billions of dollars are at stake, and the tug of war over GameStop has already minted millionaires and pushed others towards bankruptcy. And when you have Alexandria Ocasio-Cortez, Donald Trump Jr. and Ted Cruz sharing the same point of view - clearly something is amiss.
Amid this ongoing debate, Tesla CEO and world's richest man, Elon Musk is now making headlines for his "interview" of Robinhood CEO Vladimir Tenev. During a livestream on Monday, he had called for the "real story" about what was happening and what ensued was a rather unusual CEO-to-CEO showdown. This is not the first time Robinhood has attempted to justify itself, but was perhaps the first time that the CEO had found himself in the hot seat.
For those who have been living wholly under a rock, allow us to help. For several weeks now, short sellers and hedge funds have been left reeling as a Reddit forum called WallStreetBets took it upon themselves to send the share prices of once-unpopular stocks into the stratosphere. GameStop was their first and perhaps largest focal point. However, they are not the only company being championed by strangers on the internet. Shares of AMC Entertainment Holdings Inc, Blackberry, National Beverage and others have also spiked after a mention on the sub-Reddit.
But as prices rose, and Wall Street suffered, Robinhood - the Redditors trading platform of choice decided to do some damage control. There were several stages to this - from freezing trades for many of the companies mentioned about to eventually permitting very restricted trading in small numbers. Many on Twitter had also shared screenshots and messages to allege that the company also unexpectedly sold off their holdings in some of these companies without their approval. Robinhood however denies these claims. Nonetheless, Robinhood now faces a barrage of lawsuits, and mounting criticism from both business leaders and politicians.
Musk is well aware of the immense social media power that he wields. With a single word tweet on the situation he had sent Gamestop stock soaring even higher. According to one report it had risen as much as 157% in the hours after Musk's tweet.
And on February 1, as his interaction on the Clubhouse live stream became the talk of Twitter, the SpaceX CEO took it upon himself to grill Tenev. Or as he reportedly called him, "Vlad the stock impaler."
However, Robinhood appears to be maintaining its earlier position, as shared in a blog post at the end of January. "We did this because the required amount we had to deposit with the clearinghouse was so large—with individual volatile securities accounting for hundreds of millions of dollars in deposit requirements—that we had to take steps to limit buying in those volatile securities to ensure we could comfortably meet our requirements," the blog post had said.
And on Monday, Tenev elaborated further. According to reports that quote him, the company’s external clearinghouse partner had demanded it post $3 billion in collateral to back some stock margin trades. This had prompted the company to first halt buying and then take various efforts to raise the funds. Put simply, the company contends that it did not have the money to post margin.