Robinhood CEO Poorly Explains Why Company Restricted Trading on GameStop and Other Stocks
Robinhood caused major controversy on Thursday when the company restricted trading on GameStop and a number of other stocks. The Internet freaked out over the move and even Republicans and Democrats agreed it was an outrageous decision that demanded an explanation. The company's CEO, Vlad Tenev, joined Aaron Ross Sorkin on CNBC Thursday night to explain why it happened. It didn't go well.
Tenev tried to give some sort of explanation, but it felt like a guy talking around the issue, rather than just plainly saying what drove the company to restrict trading. The segment is below:
Robinhood CEO Vlad Tenev speaks out after the company decided to restrict trading in GameStop and other stocks today. “In order to protect the firm and protect our customers we had to limit buying in these stocks,” he tells @andrewrsorkin. https://t.co/LsJ5iNjJAB pic.twitter.com/yJATy66TcZ
— CNBC (@CNBC) January 29, 2021
Tenev denied there was a liquidity issue at the firm, but did say the following:
""Robinhood is a brokerage firm, we have lots of financial requirements. We have SEC net capital requirements and clearing house deposits. So that’s money that we have to deposit at various clearing houses. Some of these requirements fluctuate quite a bit based on volatility in the market and they can be substantial in the current environment where there’s a lot of volatility and a lot of concentrated activity in these names that have been going viral on social media.""
He continued:
""We want to put ourselves in a position to allow our customers to be as unrestricted as possible in accordance with the requirements and the regulations. So we pulled those credit lines so that we could maximize within reason the funds we have to deposit at the clearing houses.""
Do any of these guys just speak English? Seriously, just tell us what's up once and for all.
It sounds like the company did have some kind of issue that left it either on outside of SEC compliance or damn near close and that's why it restricted trading. It wouldn't be the first time Robinhood had an issue with the SEC. If that's the case, just say so. People could understand a straightforward explanation, instead there are now questions about what, exactly, happened and why.
Robinhood did say it would allow limited buying of the restricted securities on Friday. We'll see how that goes.