CNN’s Chris Cuomo annihilated Robinhood CEO Vlad Tenev on Thursday night after the company limited trading on a number of stocks including GameStop and AMC after amateur investors collaborated on Reddit to drive up the prices in an effort to squeeze hedge funds which had heavily shorted the stocks.
Said Cuomo: “This looks like a move by an outfit called Robinhood, which is supposed to be taking from he rich and giving to the poor, and doing exactly the opposite,” said Cuomo. “That when the big guys including one of your main investors in your company started to lose, you shut down the game to starve the little guy. … it smells bad.”
The New York Times reported on Thursday night that Robinhood was raising an infusion of $1 billion from existing investors to bridge a cash shortfall: “Robinhood, one of the largest online brokerages, has grappled with an extraordinarily high volume of trading this week as individual investors have piled into stocks like GameStop. That activity has put a strain on Robinhood, which has to pay customers who are owed money from trades while posting additional cash to its clearing facility to insulate its trading partners from potential losses.”
Wrote Robinhood in a blog post on Thursday: “Amid this week’s extraordinary circumstances in the market, we made a tough decision today to temporarily limit buying for certain securities. As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today. Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed. To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to. We stand in support of our customers and the freedom of retail investors to shape their own financial future.”