In an investigation of the strong fluctuations in the price of GameStop and other stocks recently observed in the market, the Financial Services Committee of the US House of Representatives will hold a hearing. The hearings will be held on February 18, according to a committee statement quoted by Reuters.
Vlad Tenev, CEO of Robinhood Inc., is expected to appear before the committee, but his appearance hasn’t been officially announced. Lawmakers are seeking information regarding the company’s role in the market. The American edition of Politico became aware of this from people familiar with the issue.
The private market has started buying up shares of GameStop, AMC movie theaters, smartphones maker Nokia and BlackBerry, as well as securities of other companies with a high percentage of open positions last week. Share prices skyrocketed as a result.
Flash mobs on the Reddit forum ignited the excitement in the market. GameStop stock was “warmed up” by the resource users in order to “punish” hedge funds for betting against it. Funds suffered big losses when quotes rose sharply. Melvin Capital Management, a major hedge fund engaged in shorting, lost about 53% of its investments in January.
Robinhood banned customers from purchasing shares of GameStop and other companies caught in speculative demand on Thursday, January 28. There is the outrage among Robinhood’s private customers who have brought a lawsuit against the online brokerage firm. In a claim against Robinhood, plaintiffs argued that the company’s decision left retail investors out of profit.
Moreover, Robinhood was accused of conspiring with hedge funds by the plaintiffs. This issue clarifies Maxine Waters’ responsibilities as chairman of the House of Representatives for financial services. Politico quoted her as saying: “I am concerned Robinhood would restrict trading due to collusion among Robinhood and some of the hedge funds involved.
Basically, Robinhood is a mobile app that allows you to trade on an exchange using a mobile app without paying commissions. More than 13 million customers are using the service by the year 2020 in the United States.