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A few errant thoughts on the Gamestop stonks controversy this week. First, some great sources-- @Kantrowitz podcast with @ranjanxroy, who delves into the details. 1/ https://twitter.com/Kantrowitz/status/1355297315955769347
Great reporting in the @Nytimes and @WSJ -- this piece has the best quote (from someone who decided to day trade rather than going to law school): âPlease tell the wolf of Wall Street that the pigeon of San Francisco is gonna eat your lunch.â 2/ https://www.wsj.com/articles/gamestop-mania-reveals-power-shift-on-wall-streetand-the-pros-are-reeling-11611774663
Also make sure to read @RobinhoodApp's own explanation--which must have been carefully lawyered. 3/ https://blog.robinhood.com/news/2021/1/29/what-happened-this-week
My tentative views are as follows: first, the complaints about Robinhood somehow working on behalf of hedge funds to halt trades seems unconvincing. I don't buy the conspiracy theory. 4/
The cash call from the clearinghouse seem to have been serious enough to cause Robinhood to raise a billion dollars by selling debt convertable to equity at a discount-- 5/ https://www.wsj.com/articles/robinhood-raises-1-billion-to-meet-surging-cash-demands-11611928504
I initially thought that Robinhood acted to stop excessive risk-taking, but that doesn't seem to be the motivation either--rather the deposit requirements seem to have been the cause. 6/
But there are important questions that @ranjanxroy raises about whether @RobinhoodApp makes options trading just too damn easy--needing the introduction of some kind of friction. Regulators and Robinhood, of course, need to consider what risks the app is creating. 7/end
