Game Stopped?

In the most recent development of the GameStop stock saga, the House Financial Services Committee held a hearing on February 18, in which they discussed the recent volatility of the stock as well as the involvement of hedge funds, brokerages and retail investors. Among those who testified were: Steve Huffman (CEO of Reddit), Vlad Tenev (CEO of Robinhood), Gabriel Plotkin (Melvin Captital), Ken Griffen (CEO of Citadel) and Keith Gill (not a cat). What made these hearings somewhat unusual, was the presence of Keith Gill. As he stated during his testimony, "I am not a cat. I am not an institutional investor. Nor am I a hedge fund". Keith Gill is an individual retail investor, and was the person who many believe to be the cause, or at perhaps the catalyst, of the massive spike in GameStop share prices in January when the stock increased nearly 2,000% in value before falling again after restrictions were placed on the trading of shares by most brokerages.

Those who testified were questioned by various congresspeople about their role in the volatility of the stock price in an attempt to determine if there was market manipulation. Another part of the developing story took place on Tuesday when the securities class action firm Hagens Berman Sobol Shapiro filed a lawsuit in a federal Court in Massachusetts against Gill claiming that he engaged in securities fraud. Gill steadfastly has denied this accusation, simply explaining that he believes that the stock was undervalued and that GameStop is in a good position to take advantage of it's longstanding and well established position in the gaming market. Undoubtedly there will be new information that comes out regarding the lawsuit in the future.

One thing that was made abundantly clear during the hearing, and in recent media coverage, is that the vast majority of people do not understand what Reddit is or how the subreddit r/wallstreet bets played a role in the rise in value of GameStop shares. Reddit CEO Steve Huffman tried to explain the online community by saying that the subreddit is well known for "'higher risk, higher-reward investments' but also one with 'significant depth,' where members show 'affection' towards each other". In essence, a support group for bad investors who specialize in losing money on poorly researched investment opportunities. Certainly not the highly skilled capable of manipulating markets that some have tried to make the community out to be.

What, if anything, will come of the hearings is unknown at this time. Some retail investors would like to see the hedge funds and brokerages held accountable for what they see as obvious market manipulation designed to protect their losses after over leveraging themselves by shorting the stock. On the other side, the Securities Exchange Commission is investigating individual users of a social media platform for their supposed involvement in the stock price surge. What is known, is that hedge funds lost a substantial amount of money when the price of the stock skyrocketed, and also that many individual investors have lost money as the shares came crashing back down in value after buying at a the peak expecting the prices to increase infinitely. Depending on what happens, the GameStop controversy may be spoken about in the same sentence as the 2007/2008 market crash and it's impact on the financial markets. If nothing else, the upcoming movies and TV shows will cement the event in the minds of many who were involved or simply witnessed the event.