Julia La Roche of Yahoo Finance joined Yahoo Finance Live to discuss Elon Musk questioning Robinhood’s CEO on the Clubhouse audio app.
Video transcription
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ADAM SHAPIRO: We have been talking a lot about GameStop and the phenomenon of retail investors being able to face a lot of money. Julia La Roche knows many people on both sides of this equation. We bring her to the stream, because even Elon Musk is giving Robinhood a barbecue. What do you have for us, Julia?
JULIA LA ROCHE: Well, last night – sure, if you heard about the Clubhouse, it’s the – it’s the voice chat app that’s in vogue now in Silicon Valley. Elon Musk joined one of those rooms last night, and it was basically a crowded house, so crowded that there were crowded rooms. You have seen some of these flows leak online.
And the real surprise was right at the end, Elon said, like, hey, do you want to hear from Robinhood’s CEO explain what really happened? So that’s how they started this conversation. And he was basically like, hey, man, tell me, what really happened? And he asked him about things like– how was that dark? Then, for 14 minutes, Robinhood’s CEO had to explain exactly what happened, especially with the clearinghouse side of the equation.
So, some of the things that came up during this conversation was that Vlad Tenev, who, by the way, was on the air only on Friday explaining a lot about it to start with, was sharing with Elon Musk that he … look, he received this message at 3:30 am Pacific time on Thursday from their National Securities Clearing Corporation operations team that they needed to put $ 3 billion into deposit. But eventually, he traded it for $ 700 million.
But yeah, basically, he continued – Musk kept pressing him like, look, the whole thing – well, you saw the flow of requests and something obscure is going on here, in which he refuted many of those conspiracy theories that are circulating. But a really fascinating conversation. We talked about it really capturing the popular zeitgeist. And here you have an important CEO, the richest man in the world, also someone who has been a critic of short sales, scolding Robinhood’s CEO.
SEANA SMITH: Yes, Julia, there are so many interesting lines coming out of this discussion. The only thing that stood out to me, and you mentioned it in your article, was kind of blowing up what you were saying with the National Security and Clearing Corporation, the NSCC. Musk asked who controlled it or who was behind it. And Tenev really defended the group’s action, which stood out for me and I thought it was– I don’t know if I would necessarily say it was surprising, but it caught me a little off guard.
JULIA LA ROCHE: Yes, it is interesting because I think – I was trying to investigate it. It is a kind of quasi-regulatory governing body. You have it in finance. And he said, look, their request was reasonable – from the NSCC.
But he was also– Musk was saying, well, you know, if it’s not really a government regulatory agency, but it’s also a consortium, who’s part of that? Who can be part of this? But that is not clear at this point. And he kind of said to Musk, look, you’re getting into those conspiracy theories that are floating around. Seana.
ADAM SHAPIRO: In fact, it’s Adam. Julia La Roche, thank you very much, an evacuee –
JULIA LA ROCHE: Adam.
ADAM SHAPIRO: – from a blizzard here in Manhattan, enjoying the sunny beaches of South Florida. We haven’t finished talking about what’s going on with GameStop. In fact, we’ve heard a lot about it today. Chester Spatt, former chief economist at the SEC, joined Yahoo Finance Live to discuss how the SEC and regulators should respond to Robinhood and other stock market apps that restrict trading in certain stocks.
CHESTER SPATT: Well, the SEC indicated at the end of last week that it is monitoring developments. And I think that is extremely important in the current situation. Some of the issues you were talking about, namely, Robinhood’s capital needs and the need – and the possible need for the trade limits they imposed are certainly something that the commission’s team should be addressing, understanding why- – what was the nature of the capital before Robinhood happened? Was capital inadequately – capitalized?
What the restrictions they imposed means, for example, restricting – I’m not sure I understand, but restricting the game – the game stock for an action. What kind of effect – what kind of cause does that particular restriction? I think all of this is important to understand. And the regulator, at the same time, you know, may be interested in understanding whether the Redditors manipulated the markets to produce an artificial price. It seems to me that all the questions are on the table.
But those are problems for the team to explore. At this point, they don’t seem to reach the level of lawmakers who are already trying to do an autopsy. I think first, we have to let the SEC team do an autopsy. And it is only later that legislators can – legislators must debate possible changes in the regulatory framework. First, let’s see what our regulatory framework did, why it did it, and to what extent were the actions of market participants adequate?
MYLES UDLAND: And you know, Chester, you raised the issue of market manipulation. I would love it if you could briefly describe how the SEC tries to define when a security has been manipulated. Because I think there may be a popular misunderstanding that discussing a specific action is manipulation of that action.
CHESTER SPATT: Well, I certainly – certainly not – wouldn’t think that discussing a particular action would be manipulation. It has been difficult – it is a difficult question for the commission to define. I think of manipulation in terms of attempts to create an artificial price. But I don’t … I don’t think it’s just communication, for example, that this action is undervalued because there is a potential to make a short squeeze.
Originally published