Updated Feb 18, 2021 - Economy

Robinhood CEO admits company did not respond perfectly to GameStop trading mania

Robinhood CEO Vlad Tenev apologized at a House hearing Thursday for the confusion caused by his platform's decision to restrict trading of certain "meme stocks," while admitting he did not handle the situation perfectly.

Yes, but: Tenev later admitted the company made mistakes, but could not spell out what those mistakes were — before Congress moved on to the next question.

Key exchange:

  • Rep. Madeleine Dean (D-Pa.): "You admitted to making mistakes. Specifically what mistakes, did you make?"
  • Tenev: "I admit to always improving. And certainly ... we're not going to be perfect. And we want to improve and make sure that we don't make the same mistakes twice."
  • Dean: "But what are those mistakes? That's what we're here to learn about."

Why it matters: The wild stretch of Reddit-fueled trading last month has resulted in intense scrutiny of the power of platforms like Robinhood, short-selling hedge funds and the stock market's plumbing.

  • Citadel's Ken Griffin said the firm was "absolutely not" in contact with Robinhood over its decision to limit users' ability to buy those meme stocks.
  • Keith Gill (aka "Roaring Kitty"), hedge fund manager Gabe Plotkin and Reddit CEO Steve Huffman received considerably less attention from lawmakers.

The big picture: Regulators are scrutinizing what happened during the GameStop saga and whether there was wrongdoing.

  • But there was no SEC representation at Thursday's hearing because Biden's pick to lead the agency has yet to be confirmed, said Rep. Maxine Waters (D-Calif.).

Between the lines: Jennifer Schulp, director of Financial Regulation Studies at the Cato Institute, said she's seen "very little that would meet a test for [market] manipulation," but that doesn't mean the SEC shouldn't take a deeper look.

What to watch: Waters, who chairs the committee, says there will be "probably two more" hearings related to the GameStop saga.

The bottom line: The highly anticipated hearing revealed few new details about last month's "meme stock" phenomenon that shocked the world.

  • There's still no definitive clue whether there will be any regulatory changes in response.
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