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Robinhood boss clashes with Elon Musk over GameStop trading ban

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The chief executive of US trading app Robinhood became embroiled in a debate with Tesla Inc (NASDAQ:TSLA) boss Elon Musk this week by defending the firm’s decision to block the buying of shares in GameStop Corp (NYSE:GME) and other firms involved in last week’s Reddit-inspired trading frenzy which saw an army of retail traders pile into heavily shorted stocks in an effort to ‘squeeze’ out hedge funds betting against the firms.

On Monday, Robinhood CEO and co-founder Vlad Tenev was questioned by Musk in an impromptu interview on the audio chat app Clubhouse in which he acknowledged that the initial ban on the platform’s users buying the shares was a “bad outcome”, however, he refuted claims that hedge funds suffering heavy losses during the episode had pressured the platform into limiting trades, saying instead that the company “had to conform” to its working capital requirements which were put under pressure by the unexpected upsurge in buying activity.

READ: Gamestop, YOLO trades and wallstreetbets: How trading and trolling wreaked havoc on Wall Street

Despite the refutation, Tenev said a greater level of transparency was needed to explain how brokers calculate deposit requirements, a requirement for platforms such as Robinhood due to delays between user investments and actual security purchases.

The CEO described how the platform received an unusually large deposit request of around US$3bn from its clearing agency before the opening of the US stock market last Thursday, the same day it attracted fury from retail traders by blocking purchases of shares in GameStop as well as cinema chain AMC Entertainment Holdings Inc (NYSE:AMC).

The influx of investor orders also forced Robinhood to raise US$1bn in emergency funding last week to shore up its platform, while the company also announced on Monday night that it had raised another US$2.4bn to meet the surge in user growth.

GameStop shares, which started January trading at around US$17 before soaring last week to an all-time high of around US$469 as the retail trading collective attempted to pressure the hedge fund shorts and inflict heavy losses on financial institutions. While the shares have declined since then they were still trading at around US$172 at the close on Monday, around ten times their value at the start of the year.

Story by ProactiveInvestors


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