As online brokerage Robinhood faces widespread backlash, CEO Vlad Tenev said Thursday he made the “correct” decision in restricting purchases of GameStop stock, while denying that the company did so because it doesn’t have enough cash on hand.
In an interview with CNBC, Tenev said the decision to halt trading of GameStop, AMC and other stocks was “difficult,” but the company did so “to protect the firm and protect our customers.”
Tenev explained the company made the decision to comply with mandated financial requirements from the SEC, but denied the company didn’t have enough cash on hand and said the halt was made “preemptively.”
Tenev also confirmed that the company tapped lines of credit Thursday as a “proactive” measure to ensure it can “maximize within reason the funds we have to deposit at the clearing houses.”
Though Tenev said it was the “correct” decision, he reversed course earlier Thursday and announced that Robinhood will accept “limited” trading of those stocks Friday morning.
“Of course Robinhood stands for everyday investors. From the very beginning we have stood for investors opening up access. It pains us to have had to impose these restrictions and we’re going to do what we can to enable trading in these stocks as soon as we can,” Tenev said.
GameStop shares went down Thursday following Robinhood’s initial decision to halt trading. But when the company announced it would resume limited trading Friday morning, the stock shot up 62% in after hours trading.
Retail investors, mostly on forums like Reddit’s r/WallStreetBets, have helped drive up the stock of GameStop, AMC and other struggling businesses like Bed, Bath & Beyond and BlackBerry using online brokerages like Robinhood. The frenzy has resulted in a boon for everyday traders, but it’s caused massive losses for hedge funds that shorted those stocks. The rally hit a snag Thursday when Robinhood restricted trading of GameStop and other heavily shorted stocks. The move drew near universal outrage from across the political spectrum (and a few class action lawsuits), as it shut out individual traders from getting in on the craze.