Sources tell FOX Business’ Charlie Gasparino that Steve Cohen’s Point72 hedge fund is reopening to new investors following losses linked to Melvin Capital and GME short.
Robinhood Markets Inc. is likely to suffer collateral damage from the recent turmoil when it debuts in the public market, but co-founder and CEO Vladimir Tenev must remain in control.
The Menlo Park, Calif.-Based trading app developer found itself in the midst of controversy last week after restricting trade in some highly volatile companies that were the target of a brief push. The decision infuriated customers and made the company struggle to raise money.
Vlad Tenev, Co-Founder and Co-CEO of Robinhood (REUTERS / Brendan McDermid)
Robinhood has shelved plans to go public, as FOX Business reported in the first quarter of this year, a move expected to generate a valuation of more than $ 20 billion. The company was valued at $ 11.7 billion in the private market in September.
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“Part of the valuation is math and part is pixie dust, and the pixie dust part can suffer a little bit,” said Bradley Tusk, CEO of New York-based venture capital firm Tusk Holdings.
| Ticker | Safety | Last | Change | Change% |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 104.50 | -120.51 | -53.56% |
Robinhood continues to adjust trading parameters in heavily shorted stocks, first announced last week for GameStop Corp. and others after an increase in volume strained its ability to meet clearinghouse deposit requirements and resulted in the company raising $ 4 billion – more than the company had previously collected in its nearly eight years of existence.
| Ticker | Safety | Last | Change | Change% |
|---|---|---|---|---|
| AMC | AMC ENTERTAINMENT HOLDINGS INC | 7.49 | -5.88 | -43.98% |
| BBBY | BED BATH & BEYOND INC. | 26.73 | -3.53 | -11.67% |
| BB | BLACKBERRY LIMITED | 11.72 | -2.90 | -19.83% |
The decision to restrict trading sparked outrage from users who believed the company was colluding with hedge funds, including Citadel, who were short on highly volatile stocks, including GameStop. Citadel and Point72 Asset Management jointly injected $ 2.75 billion into hedge fund Melvin Capital last week after bets soured against GameStop and other companies.
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Users also pointed out that Robinhood went against its mission of giving everyone access to financial markets.
However, the turbulence at Robinhood is unlikely to lead to Tenev’s removal, according to Tusk – at least until after the company goes public.
Typically, founders have “really strong control over things like voting rights,” he said, adding that Tenev has done “some pretty amazing work.” Its co-founder Baiju Bhatt operates behind the scenes.
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According to Tusk, the key to Tenev’s survival at Robinhood will be how he is able to come up with a counter-argument to why the company took the action it did.
The company has already started mitigating the damage, including an op-ed in USA Today, and sending an email to customers Monday explaining why they were unable to complete certain transactions.
“We had to take steps to limit buying those volatile stocks to make sure we could comfortably meet our deposit obligations,” the company said. “We didn’t want to stop people from buying stocks and we certainly weren’t trying to help hedge funds.”
Tenev will testify about the ordeal before the House Financial Services Committee on Feb. 18.