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The Almighty Buck News

Elon Musk Grills Robinhood CEO Over GameStop Trading Freeze: 'The People Demand Answers' (washingtonpost.com) 113

Posted by msmash from the no-mercy dept.
Elon Musk had just wrapped up a wide-ranging 90-minute interview on the audio chat app Clubhouse early on Monday, when he threw the hosts a curveball. "Do you want to hear the real story from Vlad [from] Robinhood about what happened on the Street with GameStop?" Musk asked. He advised the moderators to click on Robinhood CEO Vladimir Tenev so he could talk. From a report: That's when Musk launched into a torrent of questions, a CEO-to-CEO showdown over why the popular trading app had halted trading on the market's hottest stocks at one point last week. "Spill the beans, man," Musk said to Tenev, whom the Tesla CEO introduced as "Vlad the stock impaler." "What happened last week? Why couldn't people buy the GameStop shares? The people demand answers, and they want to know the truth."

Musk, who has come under fire for quality control issues, business missteps and personal behaviors, asked Tenev what caused him to halt trades on GameStop and other heavily shorted stocks last week. Were more powerful entities, such as regulators, depriving smaller retail investors of a potential payday at the expense of shadowy hedge funds? Was Robinhood partner Citadel Securities responsible for the trading halt? "Is anyone holding you hostage right now?" Musk asked. [...] "If you had no choice, that's understandable, but then we got to find out why you have no choice," Musk said. "And who are these people that are saying you have no choice?" In response, Tenev suggested more transparency was needed in the formulas used by financial institutions to calculate these requirements. He emphasized how Robinhood was able to raise more than $1 billion in capital in 24 hours to reopen on Monday. Tenev would not commit to imposing no restrictions on the stocks.
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Elon Musk Grills Robinhood CEO Over GameStop Trading Freeze: 'The People Demand Answers' More

Elon Musk Grills Robinhood CEO Over GameStop Trading Freeze: 'The People Demand Answers'

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  • Journalism (Score:5, Insightful)

    by JBMcB ( 73720 ) on Monday February 01, 2021 @11:36AM (#61015524)

    "Musk, who has come under fire for quality control issues, business missteps and personal behaviors.."

    That's some bang-up journalism there. Has no bearing on the story, but might as well bring it up, right?

    • Re: (Score:3, Insightful)

      by AmiMoJo ( 196126 )

      It's about as relevant as some arsehole billionaire ambushing another arsehole billionaire with stupid questions that he knows he won't get answers to, purely to build up his own cult of personality.

      • Re: (Score:3)

        by sinij ( 911942 )
        No, Musk is not a bystander in this. The same hedge fund people that got caught in GameStop and allegedly pressured Robinhood to manipulate markets in their favor are the people that besieged Tesla stock and attempted to use SEC to remove Musk.

        • Re: (Score:2)

          by jeremyp ( 130771 )

          Well, to be fair, Tesla stock is overpriced (source: Elon Musk), which makes it an obvious target for short selling. Gamestop stock is overpriced too.

      • Re: (Score:3)

        by gmack ( 197796 )

        That's not it. The issue is that Musk hates short sellers (I get why) and is upset they didn't get screwed over more than they did. The only problem is that a lot of Redditors were going to be out even more money if the app had allowed them to continue. The other issue is that Musk's problem was not so much the short selling but the market manipulation the short sellers engaged in to try and tank Tesla's stock.

        • The other issue is that Musk's problem was not so much the short selling but the market manipulation the short sellers engaged in to try and tank Tesla's stock.

          How did they do that, with facts and reasoned arguments, or did they outright lie?

          • Re: (Score:2, Interesting)

            by gmack ( 197796 )

            They are careful never to actually say something that would count as a lie if it ended up in court. The largest trick was sneaky use of statistics. Tesla has been back ordered for years, but they don't concentrate on that. Instead if Tesla ships more cars to a single country then "deliveries are down almost everywhere." and then next quarter, "sales are down in x country, demand is slowing." And of course there were the reports that the auto industry would kick them out of the market every quarter for s

        • Re: (Score:2, Informative)

          by AmiMoJo ( 196126 )

          Reminds me of that time Musk manipulated the market by tweeting that he had "funding secured" to take Tesla private, then didn't. As I recall the SEC fined him $40M.

          • Re: (Score:3)

            by gmack ( 197796 )

            He deserved that fine. But before than and after he had people constantly drumming up fake news to tank Tesla's stock. Where are their fines? It seems like some of them have done the same to multiple companies.

        • Re: (Score:2, Insightful)

          by Robert Goatse ( 984232 )

          The only problem is that a lot of Redditors were going to be out even more money if the app had allowed them to continue.

          I call BS. RH was covering for the Citadel folks and the hedge fund billionaires. Do you think RH was looking out the little guy by limiting the amount of shares they can buy?
          I agree that a bunch of WSB folks are going to lose a lot, but it's not up to a trading app to make that call. I'm looking to move my all my YOLO money from RH into a brokerage that doesn't restrict trading, Fidelity for example doesn't babysit traders.

        • FFS, Musk could, even now, buy up most of GME stock if he felt it could punish the shorts. If he's not in for a few hundred million (at least) then he's encouraging other people to step up against the shorts far more than he's willing to .

        • I don't understand why anyone hates short sellers. I get manipulation is bad, but short seller don't necessarily do that.

          • Re: (Score:2)

            by gmack ( 197796 )

            Yeah, but the most famous ones do. Just check out yesterday's slashdot post about a CNN article that turns out was entirely based on one TSLA short's dodgy adjustments of Tesla's financials. I also don't mind short sellers as long as they are proper shorts and not naked shorts and also don't manipulate the stock price.

        • The only problem is that a lot of Redditors were going to be out even more money if the app had allowed them to continue.

          So RobinHood, under pressure from the government, stopped the investors For Their Own Good.

          I say: stuff that noise.

          Numerous people from Reddit have said "I don't care if I make money. I'm happy if the big money guys lose money." They are setting ridiculous sell prices on their stock because they don't care if they get it.

          It's legal for the big money guys to short-sell companies. It's e

      • Those were stupid questions? I think you are so biased that you cannot see there actually is a problem here. Arseholes do have a point at times, but you do have to pay attention to pick it up. And simply blaming this on building up his cult, ignores the problem, and that's why we have these problems.

        • Re: (Score:2)

          by AmiMoJo ( 196126 )

          Did Musk expect their guy to admit to various financial crimes or lay out the defence their legal team is doubtless working on for when the SEC comes knocking? Of course not, their CEO is not the kind of idiot who does that...

          It's the sort of thing Musk himself does, and look at the trouble it has got him into.

      • It's about as relevant as some arsehole billionaire ambushing another arsehole billionaire with stupid questions that he knows he won't get answers to, purely to build up his own cult of personality.

        well...

        Look at it like this. It was already a garbage fire, and Musk just drove in in a Cybertruck with a boot full of garbage and cheerfully dumped it all on top. I have no horse in this dioxin laden race but I'll use the heat to pop my popcorn.

    • If the guy is acting like a hypocrite, is that not allowed to be included with his 'heroic actions' against another CEO that is down?

      It looks to me like he is just piling on to gain brownie points with his followers, and to deflect away from his recent explosive SpaceX news.

    • Re: (Score:2)

      by sinij ( 911942 )

      That's some bang-up journalism there.

      Watch this, I can do even better!

      The notorious Mr. Musk, talking from undisclosed location using a secretive invite-only platform ambushed upstanding Robinhood executive with unverified rumors of inappropriate pressure in dealing with alt-right Reddit stock speculators.

    • Re: (Score:2, Insightful)

      by ArchieBunker ( 132337 )

      Fits right in here. For a site of supposed tech nerds all they do is shit on Tesla constantly and talk about how great their old carbureted engines used to be. Tesla is the sole reason other companies have started selling electric cars.

      • Fits right in here. For a site of supposed tech nerds all they do is shit on Tesla constantly and talk about how great their old carbureted engines used to be. Tesla is the sole reason other companies have started selling electric cars.

        They're doing this because Steve Jobs is no longer there to kick around.

      • Slashdot has, in general, picked up a fairly strong luddite bend in the last half-decade or so. I've no idea where it came from. There used to be a time where this site would be excited and energized by electric cars (Tesla), AR headsets (Google Glass), disruption of ossified industries by "building the better mousetrap" and brazenly smashing regulatory capture(Uber/Lyft), and hell... even for all the crap we gave to Jon Katz... solidarity with other nerds versus the hipster brigades that have always hate

      • Re: (Score:1)

        by Cederic ( 9623 )

        Oh please. I could buy an electric car long before Tesla was incorporated.

        The criticisms of Tesla are due to its build quality, its shitty control interface and the overhyping of its lane keeping technology (leading to people dying).

        Oh, and the wild nonsense spouted by its owner.

        There are criticisms of electric cars - including Tesla - regarding range and the viability of charging at scale, and that's where a nice internal combustion engine still even now holds an advantage.

        I wouldn't buy an electric car wi

    • Re:Journalism (Score:4, Insightful)

      by chispito ( 1870390 ) on Monday February 01, 2021 @12:28PM (#61015738)

      "Musk, who has come under fire for quality control issues, business missteps and personal behaviors.."

      That's some bang-up journalism there. Has no bearing on the story, but might as well bring it up, right?

      You're almost there. Elon Musk and his tweets have no bearing on the story about Robinhood and Gamestop and short sellers.

      • Exactly. The story is not about Musk, it's about Tenev dodging direct questions that everybody wants answers to. This was a live interview, not a 3:00 am tweet storm.

    • In THIS case Musk seems to be doing more "journalism" than most supposed journalists are doing. It's sad to see people who've inherited the mantle of the proud tradition of being society's watchdogs, barking uncomfortable questions at people with power and demanding answers, converted into lapdogs of the rich-and-powerful who dutifully "report" whatever they're spoon-fed. In this case, in only moments, a non-journalist asked more basic journalistic questions about this incident than most of the professional

  • it's getting into the news cycle.

  • That's pretty catchy. It is very messed up... and I saw some comments here on Slashdot that very much were pushing bad info according to my "stock expert" friend. People need to be really careful and do some homework, but the gist of it seems to be what you'd expect. The hedgefund types are out to screw the little guy.

    • Best case scenario is RobinHood failed to properly manage risk for a new product ($0 fee trades), and decided they could fix the problem after the fact by selecting some of their users as bag holders, rather than admit their failures and shutdown all trading until they could capitalize.

      The big problem is that RH is flying by the seat of their pants and hurting a selected group they've decided are "bad" actors. No one has a problem with stopping trades to preserve the system. But this needs to be based on di

      • Re: Vlad the stock impaler (Score:4, Interesting)

        by dpille ( 547949 ) on Monday February 01, 2021 @12:57PM (#61015854)
        This is most likely the right view. I see a couple possibilities:

        1: The sheer volume of trading activity left Robinhood concerned about enough reserves to cover the deposit requirements of their clearinghouse. Assuming RH volume was way up, the fact that trades take a few days to actually settle means that they could have been in a position of needing a lot more cash on hand to cover multiples of their usual handle.

        2: Their "instant deposit" program got them into trouble when app downloads spiked. As I remember, when I signed up, they gave me $1000 to trade way before they actually had a dime of my money in-hard. They could likely verify it appeared to be on its way, but that's very different than actually having the funds. Essentially, the new users would have caused the instant deposit program to put RH into a cash crunch.

        It's very debatable whether restricting trading in particular securities is a good idea, but I think it makes sense. If the settlement churn is causing you problems, identifying the buying patterns causing that makes sense. Similarly, if the new money-on-its-way is the issue, turning off that faucet until you start to get some of that cash into your possession also makes sense. What, to my mind, makes RH's actions unacceptable is that they applied to every single customer. It was a self-created problem from being asleep at the switch, and their actions screwed longtime bystanders like me. (I had sold a covered call some time ago, so closing my position became impossible after regular trading hours, whereas extended hours trading would have given me the opportunity to buy more to use to cover. Even if you leave aside market timing issues and changes in price, the two transactions have markedly different tax results- buying the call back is clearly short-term capital gain, whereas covering with new shares is likely a wash sale that affects my underlying basis.)
        • Both of these answers make sense (novacula Occami once again), but it would have helped RH's case if they have come out and simply said this.

          I assume #1 is an issue they could have "blamed" on the regulators as well.

          #2 is something that should have never been allowed in the software.

      • Robinhood based their business model on traditional statistics I imagine. Having a high percentage of your customers (but not everybody else’s customers) all piling on to a single stock is likely not one of the things they planned for or modeled in their finances until they got in trouble.

        They do need to explain in detail what happened, why, and how they will avoid it in the future (to the extent possible). Based on their business model though, it will happen again when settlement risk jumps up that h

      • The same company is the trade facilitator for most brokerages. They can raise capitol requirements at will, which forces trading restrictions without touching them directly.
        Why is there a near total monopoly on that critical market function?

    • It's within the Robinhood TOS to do what they did. If you don't like it you can move to another platform, or build your own.

  • Who needs the SEC when you can have Elon Musk on Clubhouse!

  • Direct link to audio (Score:5, Informative)

    by Dan East ( 318230 ) on Monday February 01, 2021 @11:50AM (#61015588) Journal

    Direct link to the Robin Hood part:
    https://youtu.be/Cba53J1jyPM?t... [youtu.be]

    Starts at 1:44:00 (link should go right to it).

    • Re:Direct link to audio (Score:4, Informative)

      by edi_guy ( 2225738 ) on Monday February 01, 2021 @02:06PM (#61016164)

      Thanks for the link. Contrary to the tone of the TFS, this was very much a softball set of questions from Musk to Vlad. No real exploration of the relationship between RH and Citadel, just "Are you beholden to Citadel"? "No that's false" " I don't have any reason to believe that" , B.S.-y non-committal responses, and the end of it. Not looking into how RH customer trades are sent to Citadel

      Listening to Vlad was a pathetic mix of 'Woe is me', I was woken up at 3am, this has been a tough week for us, our team behaved heroically. And then laying the blame on others like the clearinghouse. RH reminds me of a financial Theranos. Basically RH sold a product saying it works, while the back end parts necessary for successful operation simply don't work except on the most basic use-cases. And then when found out the CEO comes out spinning lies and half truths.

      But they just raised another $4 billion dollars so I guess that part of the overall unscrupulous financial system is working as intended

  • Robinhood has not been transparent about the reasons why it limited buys. There is a rumor that the real reason is that Robinhood would not have the capital to cover the buys however admitting that limitation would be bad for the company. Robinhood from what I know uses a clearing house which means they have to temporarily hold onto trades which is a liability.

    • Re: (Score:2)

      by joh ( 27088 )

      Yeah, saying "we nearly went bust, but your money, uh, is safe with us" isn't good for business. Could easily cause a mass exodus. Well, at least the retail revolution would be dead in the water then, too...

    • Re: (Score:2)

      by ahodgson ( 74077 )

      Robinhood is owned by the same equity group that was getting the most hammered on the shorts. Their only reason for existence is to front-run trades from the plebs to further enrich Citadel.

      There is no mystery here why they restricted trades in positions that were harming Citadel.

      • As far as I know, Robinhood is owned by their founders. As a private company, ownership structure is not publicly available information.

  • ff RH had allowed purchases as normal, it would have cost them some of the profit it may have been entitled to by being the broker.

    Whether or not you think that the evidently ironically named Robinhood should be entitled to such profit is immaterial.

  • Too automated? (Score:3)

    by The New Guy 2.0 ( 3497907 ) on Monday February 01, 2021 @12:46PM (#61015808)

    RobinHood doesn't seem able to make rules about Wall Street, they inherit them from their upstream market providers. RobinHood previously made news for for kids not understanding and having unrestricted losses.

    Basically, this WallStreetBets board decided to pick a small handful of stocks and buy them up... leading to losses to hedge funds and profits to them. Thing is, these profits are not infinite, so these people could get seriously hurt as the stock falls back to a realistic level. That's why "no more buying up!" was declared by Wall Street, RobinHood wasn't the only site affected.

    • these people could get seriously hurt as the stock falls back to a realistic level. That's why "no more buying up!" was declared by Wall Street

      Your naivety is absolutely adorable.

    • Robin Hood made news for a couple reasons. They drove commissions down to zero (yay!). But it wasn't the kids not understanding and having unrestricted losses was a huge Robin Hood failure. They were loaning millions of dollars to people who gamed their credit limit algorithms - people with a few grand to their names. When they went bankrupt, RH ate some huge losses.

  • No slant in that article. (Score:5, Insightful)

    by kaatochacha ( 651922 ) on Monday February 01, 2021 @12:55PM (#61015842)

    "Musk, who has come under fire for quality control issues, business missteps and personal behaviors"... which have pretty much nothing to do with the questions he's asking.

    One of the important things to learn is when media is showing bias in reporting. It's often subtle, but sometimes not.

  • I don't think it will work [battleswarmblog.com].

    Silver is fundamentally different than stock in GameStop, and I don't feel they have anything like a good grasp on the dynamics of that market.

  • Do we?

    Which people?
    The people who tried to outwit these shadowy Hedge Funds?
    To "sock it to the man" - ... or to make some profit - which is it?

    After dabbling in the murky waters of crypto, there's a level of naivety that is often led by ... the not so naive.
    Pretty sure the same happens on 'consumer' investor platforms, such as RobinHood.

    Hell, it was a clever ploy, make no mistake - and the meme just ran and ran - but you have to question the integrity of those behind it, as much as you do the big hedge fund

    • ... sure, this is about Robinhood shutting down trading where 'The people demand answers'. :thinking-face: - so, billionaire trading groups didn't apply any pressure here? ... hmmm. /s

    • "We need to really teach these greedy hedge fund 'shadowy figures' a lesson and we love gamestop and want it to stay open, protect jobs, so, let's buy buy buy ... and HOLD. Yeah!"

      There's no doubt in my mind that there were people in WSB that were misrepresenting their intentions for the sake of making money. However, I do believe there were also a lot of people who knew they would probably lose money but it was worth it for the opportunity to inflict a bit of pain onto a group that frequently inflicts a l

  • Musk did Tenev a favor here, and I wouldn't be surprised if Vlad asked him to do this.

    The reporter missed the relevant details of Musk's history, which is that he absolutely hates short sellers and is very public about that. He is very credible as interlocutor representing the anger felt by Robinhood users concerned that there was some "shady business" done to the benefit of the short sellers.

    The most important part of the conversation is that their clearing house requested a $3 billion deposit for them to

  • Robinhood does instant trading, meaning you put money in and it is available to trade. Most brokers don't do this because that cash actually takes 2 days to clear, and they have to balance their books (in addition to balancing cash from incoming accounts, they also have to balance all other stock option transactions which can also take time to clear) so one of the problems that robinhood had was keeping their books balanced. If they don't balance the books, they can get shut down and all trading stops which

  • I don't get it - why is the business world making Vlad Tenev a pariah? I believe he is being responsible. As with everything in life, if it sounds too good to be true then it probably isn't.

    I would guess he has looked at it two ways:

    1. The stock is way over valued and he does not want people to lose money
    2. When (not if) it comes crashing down and people lose money they will probably try to sue his company for allowing them to make dumb decisions and invest in shitty over-valued stock

    Also, isn't it t
  • Elon Musk, "who has come under fire for quality control issues, business missteps and personal behaviors", did another good thing in a string of the good things he seems to be doing. We know more about why Robinhood stopped letting people buy the stock - why didn't journalists get us this information days ago? So many smoothbrains trying to tear this guy down.

  • This "CEO" rambles, stumbles his words, and uses most of his breath on "like, y'know, and, uh, kinda, so" filler words while attempting to answer the only question anyone cares to hear from him. It's not as if Musk caught him by surprise with a question out of left field.

    I would expect a billionaire to have a prepared, informed, articulate answer to the top headline question about his company. Instead, this person sounds as knowledgeable and confident a teenage restaurant wait staff explaining the dinner

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