‘I am not a cat’: Chaotic GameStop hearing provides tense exchanges, humor as lawmakers grill key players in saga
The GameStop saga took center stage Thursday when lawmakers held a congressional hearing to examine what happened during last month’s trading frenzy after the event set off a series of federal probes into possible market manipulation.
The virtual hearing, which was held by the House Financial Services Committee, was chaotic at times as lawmakers interrupted and grilled key players involved in the episode, including the chief executives of Reddit, Robinhood, electronic-trading firm Citadel Securities and hedge fund Melvin Capital.
Also attending was the investor who spearheaded the frenzy on the r/WallStreetBets Reddit forum, Keith Gill, known as “DeepF—ingValue.”
Last month, a band of small-time investors on Reddit helped boost GameStop shares 1,000% in just two weeks, at one point helping them touch $500 in pre-market trading. The surge caught short-selling hedge funds by surprise and was initially viewed by many small investors as a victory for the little guy over wealthy Wall Street investors.
The hearing on Thursday, which was referred to as “political theater” at some points, didn’t disappoint those looking for a bit of drama and humor.
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During his testimony via video, Gill, also known as "Roaring Kitty" on YouTube, featured a poster of a kitten draped with his signature red headband that he typically wears during his live streams in the background.
“A few things I am not,” Gill, a day-trading suburban dad, said at the beginning of his address. “I am not a cat."
His cheeky remark sounded like a reference to a Zoom filter faux pas last week, in which a lawyer at a virtual legal hearing in Texas found himself with a cat filter over his face.
Shares of GameStop briefly jumped when Gill began speaking. The stock price of the struggling videogame retailer, which were trading around $44 leading up the hearing at noon, rose above $48 following his opening remarks. Shares later slid below $41.
Robinhood and Citadel Securities faced most of the scrutiny from lawmakers, along with Melvin Capital. Gill and Reddit CEO Steve Huffman, however, felt less of the heat.
Lawmakers were looking into whether Robinhood and other brokerages that temporarily restricted trading in GameStop shares and other stocks were in compliance with federal regulations.
Rep. Maxine Waters, D-Calif., the chairwoman of the House Financial Services Committee, grilled Robinhood CEO Vlad Tenev and Citadel CEO Kenneth Griffin. In rapid-fire questioning, Waters demanded Tenev and Griffin simply answer “yes or no” to her questions.
Waters pressed Tenev to answer whether Robinhood had liquidity problems in a tense back-and-forth.
Tenev responded they “always felt comfortable with our liquidity,” and continued to give extended answers, including that the “additional capital we raised wasn’t to meet capital requirements.”
Waters interrupted a few times, pressing “please answer yes or no” and “I don’t have time, I just need a yes or no answer.” She continued to reclaim her time.
The California congresswoman used the same style of questioning with Griffin.
Waters disputed GOP Michigan Rep. Bill Huizenga, who called the hearing "political theater."
"I appreciate all of the members who are participating today,” Waters said. “This is not political theater at all.”
In another heated exchange, Griffin faced questions from Rep. Brad Sherman, D-Calif., who pressed the hedge fund billionaire over “payment for order flow,” a controversial practice where trading firms pay online brokerages to execute customers’ orders.
"Is the Robinhood customer getting the same price as the Fidelity customer?," Sherman asked Griffin, who attempted to skirt the question.
“You are doing a great job of wasting my time,” Sherman told Griffin. “If you’re going to filibuster, you should run for the Senate.”
Rep. Alexandria Ocasio-Cortez, D-N.Y., who criticized Robinhood over its promotion of “free trades,” pressed Tenev over the company’s practice of “payment for order flow,” which he said generates the majority of the company’s revenue.
Tenev argued that selling customers’ orders rather than charging commissions "allows for commission-free trading."
At one point, he apologized to customers for the restrictions it rolled out in late January that prevented them from buying shares in GameStop and other high-flying stocks.
"Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us," Tenev said. He added that the online brokerage is "doing everything we can to make sure this won’t happen again."
In closing remarks, Waters said Thursday that there will be two more hearings related to the GameStop saga, one with the Securities and Exchange Commission and Financial Industry Regulatory Authority and another with securities experts.
Jerome Selvers, an attorney at Sonnenblick, Parker & Selvers, and a former SEC division and enforcement trial attorney, doesn’t expect that any sweeping legislation or regulations will follow after Thursday's hearing.
“If the SEC wanted to do something, there are adequate resources under existing statutes,” Selvers said. “The hearing will get publicity, but I don’t think any new laws, rules or regulations will come out of it.”