The House Financial Services Committee is investigating the coordinated effort from Reddit’s equity trading community to drive the surge in GameStock Inc.’s (NYSE:GME)stock price and other shares thus squeezing hedge funds such as Melvin Capital who had bet against it. The committee will hold a hearing on February 18 entitled “Game Stopped? Who Wins and losses When Short Sellers, Social Media, and retail Investors Collide.” The hearing is part of the probe in which YouTube steamer, Roaring Kitty who helped drive interest in GameStop is expected to testify alongside top executives.
GameStonk saga key witnesses to testify
Congresswoman Maxine Waters announced the witness list on Friday of some of the main perpetrators of the GameStonks saga. The witnesses include Keith Gill, also known as Roaring Kitty, Reddit co-founder, and CEO Steve Huffman, Robinhood Co-CEO Vlad Tenev, and Melvin Capital CEO Gabriel Plotkin. More witnesses are likely to be named, according to the committee chair Congresswoman Waters.
Reddit, Citadel, Robinhood, and Melvin have been at the center of the GameStonk saga in which retail traders promoted GameStop stock on Reddit. Retail traders on the WallStreetrBets subreddit came together and bought GameStop shares to screw hedge funds that had significantly bet against the struggling game retailer. Interestingly, the plan worked, and as a result, GameStop’s value surged almost 500%, with short-sellers such as Melvin losing billions. Citadel’s hedge funds and firm partners had put around $2 billion into Melvin.
The New York Times indicated that Gill was central in perpetuating and getting the campaign going after his frequent tweets and videos regarding his GameStop investment. For instance, at one point, Gill’s original investment of $53,000 he made in 2019 had grown to almost $48 million.
It is vital to state that Gill and other small-time investors turned to free online trading platform Robinhood to acquired GameStop shares before setting sights on other floundering stocks favored by the subreddit group. Robinhood could potentially face lawsuits and market manipulation allegations after it restricted trading of the “YOLO stocks” at the heights of the stock market craze.
Robinhood faces suits for restricting trading
Republicans and Democrats are outraged by the trading platform’s decision to halt the trading of the craze stocks on January 28, 2020. Robinhood CEO said that they had to impose restrictions following wild trading in the shares, which triggered a $3 billion margin call by the trading platform’s clearings house this straining the balance sheet.
Waters indicated in January that the House Committee hearing will look into the recent GameStop stock activity. She said that they will also focus on other affected stocks with a focus on online trading platforms, short-selling, gamification as well as their systemic impact on retail investors and capital markets.
Equally, the Senate Committee on Banking indicated that it will hold a hearing on the current stock market’s state following the GameStonks saga. Securities regulators in Massachusetts have equally issued a subpoena for Gill’s testimony.