Reddit, Robinhood and Roaring Kitty prepare to face Congress in GameStop Corp hearing

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The boss of social network Reddit, Steve Huffman, alongside the chief executive of trading app Robinhood, Vlad Tenev, and Keith Gill, a YouTube streamer better known as Roaring Kitty, are to form an unusual cohort of witnesses on Thursday when the Financial Services Committee of the US House of Representatives begins a hearing to investigate the recent trading frenzy in shares of GameStop Corp (NYSE:GME).


The virtual hearing, titled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide” which was originally announced last month, will also include the CEO’s of several major hedge funds including Gabriel Plotkin, the boss of Melvin Capital, and Citadel LLC CEO Kenneth C. Griffin.


READ: Roblox delays Reddit ‘meme stock’ status as direct listing pushed back to March


Congresswoman Maxine Waters, who chairs the Committee, said on January 28 that the hearing has been convened due to “the recent activity around GameStop (GME) stock and other impacted stocks with a focus on short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors”.


“Hedge funds have a long history of predatory conduct and that conduct is entirely indefensible. Private funds preying on the pension funds of hard working Americans must be stopped. Private funds engaging in predatory short selling to the detriment of other investors must be stopped. Private funds engaging in vulture strategies that hurt workers must be stopped”, she added.


The hearing was sparked by a sudden surge in the price of GameStop shares in Janaury after an army of retail traders, encouraged by the Reddit forum r/wallstreetbets, began piling into the stock to inflict large losses on hedge funds that had heavily shorted the video game retailer. Particular ire was directed towards Melvin Capital, which was labelled by some as one of the biggest shorters of GameStop shares.


Trading apps such as Robinhood also found themselves at the core of the frenzy as retail traders increasingly turned to the apps, which allow users to purchase shares with no commission, to buy up GameStop stock and push the price higher. The app then sparked fury from several politicians and the wider retail trading community by blocking the purchase of shares in the company for a brief period, with some accusing Robinhood of caving to pressure from the hedge funds to prevent buying of the shares to avoid further losses on their short positions.


READ: Robinhood boss clashes with Elon Musk over GameStop trading ban


Tenev has said since that the app blocked the trades to preserve its balance sheet during usually high demand for orders, having also tapped its investors for over US$3bn in emergency funds during the frenzy.


Meanwhile, Gill, who aside from his Roaring Kitty pseudonym on YouTube also contributes to the r/wallstreetbets forum under the username u/DeepFuckingValue, is likely to have attracted attention due to his influence in the community as a financial investor and analyst, having begun posting about GameStop after investing US$53,000 in 2019, the value of which has since ballooned to around US$48mln as of the end of January.

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