Warren Is Asking The Right Questions
Why was /r/WallStreetBets was able to make GameStop’s stock soar?
It has been a haze of hot takes and half-baked explainers about how /r/WallStreetBets was able to make GameStop’s stock top out at $380. In this all, Elizabeth Warren released a letter to Acting Chair of the Securities and Exchange Commission that is asking all of the correct questions. Her letter is refreshingly even handed and does not play into the narratives brewing in the media. I strongly suggest that you read the letter in full, but I will post her questions here.
What were the causes of the recent dramatic shifts in GameStop share prices? Did these shifts represent a “fair, orderly, and efficient” market function?
Did the sharp rise in GameStop’s share reflect changes in the company’s fundamental value? If not, what drove these changes of GameStop share prices?
To what extent did large investors, such as hedge funds like Melvin Capital Management, and their short positions impact the fluctuation of GameStop’s share prices? Did any of these practices violate existing securities laws?
To what extent did online message boards, such those on Reddit, or broader social media amplification impact the fluctuation of GameStop’s prices? Did any of these practices violate existing securities laws?
Do the wild swings in value of GameStop and other companies affected by similar trading schemes present any systemic concerns for financial systems or the stock market?
What steps will the SEC take to ensure that securities markets better reflect prices that are in line with the intrinsic and fundamental value of underlying companies?
Please describe the impacts of disorderly, inefficient, and unfair prices in securities markets on communities, consumers, workers, and investors.
What steps will the SEC take to update and implement rules defining market manipulation? Please provide a detailed timeline.
Please describe any gaps in the SEC’s current regulatory regime in addressing market manipulation.
Please describe any gaps in the SEC’s current enforcement practices or capabilities to address market manipulation.
It is refreshing to see an elected official to do more than utilize their letters to other government bodies to grandstand. I hope that the hill hearings on this are in the Senate, and not in the House. The kind of grandstanding that you come to expect from House hearings helps nobody.