The Week the Buying Stopped
GameStop, January 2021, through the records of an investor, a hedge fund, a broker, a clearing house and those who looked into it
In January 2021 the share price of a video game retailer rose about 2,700%, and then several brokers stopped their customers from buying it. Many people formed a view about who was behind that.
This story keeps to the records: filings, testimony to Congress, a regulator’s report, a committee’s report and a court’s opinions. Where a record is one party’s account, the story says whose. A connection is not evidence of wrongdoing.
Jan 2021
One stock. GameStop, a video game retailer based in Grapevine, Texas, saw its share price rise about 2,700% between 8 and 28 January 2021. Then Robinhood, a broker in Menlo Park, California, stopped its customers from buying more.
7 Jun 2019
The bet for. In June 2019 Keith Gill, an individual investor, bought call options on GameStop, and he posted his analysis on social media. He later told Congress that he thought the company was undervalued, and that his investment and his posts were entirely his own.
8 Jan 2021
The bet against. A short seller gains if a share price falls. Melvin Capital, a hedge fund, had been short GameStop since it began in 2014. Through most of 2020 short interest hovered around 100% of the shares available to trade, because a lent share can be lent again.
11 Jan 2021
The crowd. On 11 January GameStop named Ryan Cohen, of Chewy, to its board, and media attention grew. Early in the month fewer than 10,000 accounts traded the stock in a day. By 27 January nearly 900,000 did.
25 Jan 2021
New money. On 25 January Citadel and Point72 said they would put $2.75 billion into Melvin Capital. Its founder, Gabe Plotkin, says Melvin was then closing its GameStop short at a loss. He told Congress that the fund was not bailed out.
27 Jan 2021
The deposit call. Trades then took two business days to settle, and a clearing house, NSCC, holds deposits from its members until they do. On 27 January GameStop closed at its high of $347.51, and NSCC called for $6.9 billion more.
28 Jan 2021
Before dawn. Early on 28 January NSCC told Robinhood it was about $3 billion short, according to Vlad Tenev, its chief executive. Within hours customers could sell GameStop but not buy it. Robinhood says the limits were necessary to meet its deposit requirements.
29 Jan 2021
Whose decision. SEC staff added a point. NSCC’s rules do not let it tell members to stop trading a stock. A deposit call can lead a broker to restrict trading, the staff wrote, but that decision is the broker’s.
18 Feb 2021
The question. Citadel Securities paid Robinhood for its customers’ orders: 34% of Robinhood’s revenue in 2020. At a House hearing on 18 February, a member asked if anyone at Citadel had talked to Robinhood about stopping the buying. Ken Griffin, Citadel’s chief executive, said no.
18 Feb 2021
The same question. Vlad Tenev was asked if the decision came from pressure by anyone on the witness panel. He said no. SEC staff later recorded that witnesses testified to this, and the staff reached no finding of their own.
14 Oct 2021
What moved the price. The episode is widely called a short squeeze. In October 2021 SEC staff wrote that short sellers buying back added to the price at times, but that positive sentiment sustained the rise. This is the staff’s finding, not the Commission’s.
18 May 2022
Melvin closes. In May 2022 Melvin Capital said it would unwind its funds and return cash to its investors, CNBC reported. Gabe Plotkin wrote that he would step away from managing outside money.
24 Jun 2022
The House report. In June 2022 the committee’s majority staff said Robinhood’s risk management was inadequate, and that DTCC, NSCC’s parent, waived $9.7 billion of deposits on 28 January. These findings are the majority staff’s, not the whole committee’s.
15 Feb 2023
One day shorter. In February 2023 the SEC cut settlement from two business days to one, starting on 28 May 2024. In the SEC’s words, that step was informed in part by episodes of market volatility in 2020 and 2021.
26 Jun 2024
In court. Investors sued. A federal appeals court upheld the dismissal of state-law claims against Robinhood in 2023, and of an antitrust claim against Robinhood and Citadel Securities in 2024. The court did not decide whether the investors had plausibly alleged an agreement.
Others will explain. Keith Gill left the explaining to others. A regulator, a committee and a court have each looked at a part, and each line here shows its proof. A connection is not evidence of wrongdoing.
Every record in this story is one click away on the page for the GameStop short squeeze, and each link there shows its proof.