Okay, so now you're the only CEO. Robinhood is ramping up like crazy, and then the GameStop situation happens. Now, GameStop has been a dog forever, right? Because they still have physical stores that sell video games on DVDs and packaging, and everything was going digital. Most people who are gamers, and me included, were downloading games. We were not going to the store and so forth.
And everyone pretty much knew that it was a dying business. So, a lot of these big hedge funds had these massive shorts on GameStop, meaning that they would make money as GameStop went down in price.
But there was a guy named Roaring Kitty who got into his head that GameStop still had a lot of value and you really need to invest heavily in it, and he started putting out videos on YouTube and gathering all these people to kind of join in this whole situation. Now, I think part of it was, yeah, there's some value here, but there's all these hedge funds that have these short positions, and if we make the price go up like crazy, that's going to screw all the rich people.
Is that a pretty fair overview of the situation?
I think this was a situation with a lot of layers, right? Um, exactly. One of the ones that I think you missed is, and I actually felt this because, you know, I'm a millennial. A lot of our customers are millennials. We kind of grew up and went through the same life phases together.
And I remember growing up, I would go to GameStop all the time. That's where I would do my shopping.
And its predecessor, we had this one called Funkoland. I don't know if you remember Funkoland. Anyway, I think it got acquired by another company that got acquired by GameStop. And so, up until very recently, I was like a big GameStop shopper. I never really made the transition to Steam or anything like that. I always just preferred going and getting my games there. So, I think there was this nostalgia element of the customer base where, hey, this was a great company. I love shopping there, you know, and these companies were unfairly beaten down by forces outside of their control, which at the time wasn't just kind of digital technology disruption, but it was also like the government, you know, said you couldn't go into physical stores anymore. So, you know, what failed? Well, Hertz, companies like Hertz, GameStop, AMC, all these companies, American Airlines, you know, American Airlines was very popular among retail at the time. And these were companies that our customers had really close emotional bonds with that they also perceived as being unfairly punished by the restrictions of the COVID environment.
And in the past, like in 2008, the government maybe would have bailed those companies out, right?
The government's not going to bail out GameStop.
No, it didn't happen. So, they were bailing out banks. They were not bailing out GameStop or AMC. That was not going to happen.
Also, the car makers, right?
Car makers. Yeah, true. But you're talking about something that's essential to society. Banks and cars. And you could... video games, a physical video game store. Like, okay, let's just keep it honest. Like, as an actual stock investor in 2021, I don't think you looked at GameStop and said, 'Wow, I want to invest in that company. That's going to go up.'
I think a lot of people did. A lot of people did. Yeah.
Other people did. But if someone has a level of sophistication like you and I, we weren't looking at GameStop as a real investment.
Well, yeah. Again, I can't talk about my own investing.
Okay. Okay. Sorry. My bad. What I'll tell you is... I don't want to mess you up.
I think again there was the nostalgia and almost like the people's bailout of these companies, right? The government's not bailing them out, but people band together and they wanted to come together as a collective to save them. There was an element of that. There was also the element of, all right, a lot of people maybe don't care about the companies but see it as an investment opportunity. And I think at that time the thesis, if I had to summarize, was Ryan Cohen's involved. Ryan Cohen's like a legendary entrepreneur. Look at what he did with Chewy. He's interested in this company. Maybe he's going to get some resources to hire a good management team that can kind of navigate this transformation. And you can kind of see the ingredients of that at the time at least playing out because their high stock price allowed them to bring in a leadership team from companies like AWS. So yeah, and of course not saying anything about their execution, but I think that was a thesis, right? Can you bring in resources and actually take the brand and actually resuscitate the company?
I mean, look at where GameStop is right now. I mean, it's pretty much where it was before. Just going to put that out there. I would not invest in GameStop, but go ahead.
Yeah, I haven't looked at it, and certainly wouldn't recommend or not recommend investing in it, but I think that was the belief of some people. And you know, a lot of people love Ryan Cohen out there, and I don't think you can argue against him as an entrepreneur. So some people say, well, you know, if he's in it, I'm in it too.
Right? Because GameStop in right around November of 2020 went from around $2 to around $80, and then it just kind of kept going. Then it got up to like $200 or $300 over the course of a few days.
Yeah, even higher than that I think. But yes, it was around $86 in 2021.
But I think it actually got intraday. I think it actually got higher. I think it got into the hundreds of dollars.
At one point. Yeah. Yeah.
Yeah. I think we're both right. So suddenly you had this huge surge of people buying GameStop, and Robinhood was a place that a lot of people were buying and selling stocks. So all these sales are coming in, and then things started to go a little bit crazy on your end. So explain to me what happened on the Robinhood side.
Yeah. Essentially what happened was there were these regulations put in place, some of them as a result of 2008, the global financial crisis, that required brokers to put up money to support the trading happening on the platform. And this isn't customer money. It's actually firm money. And this was all kind of algo driven, right? You can actually look in the rulings and see the formulas for how much corporate cash you have to put up to support the trading. And the levels of corporate cash Robinhood had to put up went from low hundreds of millions to the billions. And I think part of the reason there was these formulas that were put in place by law didn't really account for situations like GameStop. It was more like everything's going haywire structurally in the market, and so, you know, we need to prevent people from trading in these situations.
Yeah. And it was a very weird situation, right? Because not only were retail investors buying the stock like crazy, but the short sellers were being squeezed, so they had to actually buy more stock.
So now the stock price is going up from the short sellers and the retail investors at the same time. So it's just going crazy. And you guys had to come up with $3 billion.
