Several executives of the companies involved in the social media-fueled rally in stocks such as GameStop and AMC Entertainment have been called to testify at a hearing set to be held later this week.
The House Financial Services Committee is set to hold a virtual hearing on Thursday, Feb. 18, to discuss the recent rise in shares of companies hit by coronavirus lockdowns and changing consumer demand following a call made by a group of traders on the social media platform Reddit.
The hearing titled: "Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide" will be chaired by U.S. Rep. Maxine Waters, a Democrat from California.
Among those that had been invited to participate in the hearing is Robinhood CEO, Vlad Tenev, and Reddit co-founder and CEO, Steve Huffman. The committee also invited several people involved in the online call to bring down short sellers, including Reddit use and YouTube streamer Keith Gill, also known online as Roaring Kitty.
Gill reportedly played a central role in the rally of GameStop's stock. He reportedly made several posts online throughout last year, calling on people to buy the stock. Reddit traders, particularly members of the subreddit r/WallStreetBets, rallied behind him and his call to target major hedge funds shorting the stock.
Robinhood was soon hit with several lawsuits, including one that alleged that the company was depriving its customers the ability to trade to "manipulate the market" for the benefit of larger financial institutions.
A report from the New York Times said that Gill may have had an ulterior motive behind the social media campaign. He reportedly had held a significant investment in the stock, which is estimated to be now valued at more than $48 million.
Due to the surge in traders buying GameStop shares, mobile trading app Robinhood was forced to temporarily restrict users from trading certain stocks. This caused a public outcry, with some traders claiming that it was unfair and unethical for Robinhood to prevent the public from buying the stocks to protect hedge funds.
Some hedge funds that had been short selling the same listings and incurred billions of dollars in losses. Melvin Capital, one of GameStop's largest short sellers, was forced to take a $2 billion cash infusion from Citadel after suffering massive losses.
