Barstool Sports founder Dave Portnoy argued on Wednesday that retail investors can’t trust the trading app Robinhood and its CEO Vlad Tenev following the GameStop frenzy and told “Varney & Co.” he believes Robinhood “is finished.”
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“I think somebody is going to come along who is going to offer an alternative,” Portnoy said.
Portnoy made the comments one day before a House panel will hear testimony from Tenev and top hedge fund managers regarding the GameStop trading saga.
The House Financial Services Committee is looking into how a flood of retail trading activity drove GameStop and other shares, including AMC and Bed Bath & Beyond, to extreme highs, squeezing hedge funds like Melvin Capital that had bet against them.
|AMC||AMC ENTERTAINMENT HOLDINGS INC||5.39||-0.23||-4.17%|
|BBBY||BED BATH & BEYOND INC.||26.39||-1.39||-5.00%|
On Friday, the witness list was announced on by Congresswoman Maxine Waters, chairwoman of the House Committee on Financial Services. The list includes Citadel chief executive Kenneth Griffin, Melvin Capital Management CEO Gabriel Plotkin and Reddit CEO Steve Huffman, according to a news release.
Robinhood was criticized for temporarily restricting trading as the mobile brokerage app confronted high trading volume. The high volatility was spurred by the speculative investing discussion forum WallStreetBets. The group of Reddit users banded together to buy up GameStop’s call options, causing the struggling retailer’s shares to soar to unprecedented levels and hurting market short-sellers. The group then proceeded to target other heavily-shorted stocks.
Portnoy told host Stuart Varney on Wednesday that he wants Tenev to go to jail and criticized Robinhood for restricting trading in volatile stocks like GameStop, saying the broker caused its share prices to tank.
“I don’t understand how anybody, any of their [Robinhood’s] clients can have any trust,” Portnoy continued. He also stressed that he doesn’t think retail investors can ever trust Tenev again.
“How can you ever trust this guy again? You can’t,” Portnoy told Varney.
A Robinhood spokesperson did not immediately respond to FOX Business’ request for comment.
Last month, Tenev said in a Twitter thread that as a brokerage firm, the company has many financial requirements, including “SEC net capital obligations and clearinghouse deposits”, which fluctuate based on market volatility and exist to “protect investors and the markets.”
“It was not because we wanted to stop people from buying these stocks,” Robinhood added in a blog post. “We did this because the required amount we had to deposit with the clearinghouse was so large — with individual volatile securities accounting for hundreds of millions of dollars in deposit requirements — that we had to take steps to limit buying in those volatile securities to ensure we could comfortably meet our requirements.”
Portnoy told Varney he got “trashed” during the frenzy losing “almost 700 grand” when he “got out.”
Speaking with FOX Business late last month, Portnoy also criticized Robinhood for changing the rules “overnight without telling anybody.” However, the Robinhood user agreement, which is required for everyone to sign before trading on the app, states that the company may at any time and without prior notice “prohibit or restrict” a user’s ability to trade.
The virtual hearing, entitled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide,” will take place on Thursday at noon EST.
Portnoy told Varney on Wednesday he is “glad” the House hearing will be taking place because “people got absolutely murdered and lost money that I feel like they unfairly lost.”
“It’s not so much that people invest in the stock market thinking it’s automatic, but they didn’t know the rules could change,” he said. “That’s the big thing that’s different with this one, they [retail traders] lost money because Robinhood changed the rules on them midgame.”
FOX Business’ Audrey Conklin and Catie Perry contributed to this report.