Tesla officially changed Elon Musk’s title of CEO to “Technoking of Tesla” in an 8-K filing with the Securities and Exchange Commission. Tesla’s CFO, Zach Kirkhorn, is now effectively “Master of Coin” according to the filing as well.
It’s 2050. An elementary school teacher is asking their students what they want to be when they grow up. Some kids want to be rockstars, others are medical school bound and one child replies, “I want to be Technoking.” Thanks to Elon Musk, that kid’s dreams just might come true some day.
On Monday, Mar. 15, the Tesla Inc. co-founder and CEO took on a new title: “Technoking of Tesla.” In a report filed with the Securities and Exchange Commission, Musk provided little explanation of the name switch; he also formally changed the title of Tesla’s chief financial officer, Zack Kirkhorn, to “Master of Coin.” Kirkhorn’s new title is a reference to a Game of Thrones character.
This apparently inconsequential change to Tesla Inc. has already prompted others to reevaluate their C-suite names. Siqi Chen declared himself the technoking of Runway Financial Inc., a financial startup that provides support and advice to struggling businesses. Runway Financial’s website is ripe with emojis, denoting a marked shift from the traditional stuffy environment of, for example, Charles Schwab. Runway Financial promises to deliver “something that fundamentally rethinks the role of financial data;” their CEO’s — or, rather, technoking’s — decision to change C-suite titles indicates that they are, on some level, fundamentally rethinking the traditional structure and formality of business hierarchy. Mr. Chen told The Wall Street Journal that “all titles are jokes, and it’s tribute to our Technoking Musk for making this clear to the SEC.”
There is no question that Musk is a trendsetter. But his decision to change the traditional C-suite titles to names that embrace meme culture could be reactionary to the rise in importance of retail investors as of late. Recall what happened with GME in late January 2021: Redditors drove the stock price up, causing Wall Street investors to hemorrhage money and re-evaluate their positions. It is clear that retail investors possess the power to influence markets in unprecedented ways. Given the fact that they are making their trades online, largely based on the advice of fellow netizens, perhaps Musk is simply catering to their culture.
Moreover, Tesla purchased $1.5 billion in Bitcoin this year. They are not only embracing the convergence of Internet and finance through trivial name changes, they are also literally investing in this new future of finance. It is clear that Musk is paying attention to the emerging influence of Internet culture on finance; perhaps Tesla will implement some more radical changes than technoking in the near future.
Robinhood can be accessed by retail investors anywhere from their mobile phone. Robinhood boasts giving investors autonomy over their finances with low barriers to entry and nonexistent brokerage fees.
The old English tale of Robinhood has been passed down for generations and describes a story of populism where a legion of men equipped with bow and arrow take from the rich and give to the poor. Fast forward to the 21st century and Robinhood is known as a discount brokerage firm used by many new investors and retail traders. You may have heard in the past few weeks that Robinhood was at the center of the GameStop saga or you caught their Superbowl ad during the game, chances are you have heard of the investing app. The news certainly is filled with Robinhood headlines lately.
Introduced in March 2015, the platform gained popularity with their approach of having no commission fee investing. The story of Robinhood began with Stanford roommates Baiju Bhatt and Vlad Tenev. Both worked on Wall Street for a period of time, designing software, until the two decided they needed a change. They founded Robinhood with the purpose of eliminating barriers for the little guy and democratizing investing. Since Robinhood’s inception, the app now boasts well over 10 million users, but the company has been struggling with a public relations nightmare since the start of the year.
When the pandemic began in March, many people with strong gambling tendencies turned to both the stock market and the internet. They chose Robinhood as their choice of brokerage and they flocked to a reddit forum known as Reddit Wall Street Bets (WSB). Headlines popped up from the Wall Street Journal, Forbes, and, most notably, the Collegian about some of these traders and their impact on the financial markets. Robinhood was picking up some negative publicity at the time with complaints of slow software, minimal customer service support and hidden fees. They were even threatened with a lawsuit surrounding high frequency trading data and hedge funds. In addition, a Robinhood user committed suicide after an in-app glitch showed he was in the red for over $700k. Currently, Robinhood is faced with a pending lawsuit from the individual’s family.
But things went from bad to worse at the start of 2021. Users from Reddit WSB saw that hedge funds were heavily shorting GameStop (GME). Retail investors flocked to reddit and called for many to buy shares into GME. As many bought shares and GME’s stock price flew over $300 a share, Robinhood entered a cash crisis. They ran out of cash to clear trades with the Depository Trust Clearing Corporation (DTCC) and Robinhood changed orders of GME to sell only, after only a few days the stock price declined heavily. In that short period of trading, they were forced to raise $3.4 billion.
The world erupted and many were livid. They took to social media websites like Instagram, Reddit and Tik Tok preaching that Robinhood violated their rights to trade. The Federal Trade Commission (FTC) received more than 100 Robinhood related complaints between Jan. 24th to Feb 2nd and in response to the criticism, Robinhood issued a statement. They described a DTCC clearing issue and then aired a commercial during the Super Bowl promoting their slogan, “We are all investors.” The commercial did very little to help the company and many continued to complain over social media.
With a public relations nightmare on their hands, the company might be forced to postpone their plans to go public in the second quarter, but, as of now, Robinhood is in full swing to go public this year. They are currently valued at $20 billion or more. With the public’s frustration, Robinhood’s future is in question. If Robinhood is to continue on, they must update their customer service, apologize to the angry masses, and make right to achieve change in the financial sector.
GameStop stock reached an all-time high of $492.02/share on Jan. 28, 2021, putting Wall Street investors at risk of losing millions on shorts.
In January of 2019, GameStop (GME) was trading at $15. By January 2020, less than $5 per share. Shorting the stock of a company that becomes increasingly obsolete as we continue to redefine the digital age is widely regarded as a smart investment; that is why a lot of Wall Street investors felt confident in shorting GME. But on Jan. 28, 2021, GameStop reached an all-time high of $492.02—and those investors were taking on hemorrhaging losses. Who do they have to blame for initiating their downfall? Users from a Reddit forum called r/WallStreetBets.
These users conspired to drive up share prices of fledgling companies, yielding them significant profits while simultaneously stealing profit from Wall Street investors. When put that way, it sounds Robin Hood-esque. It then follows that these users waged their war via the online trading platform, Robinhood. This app aims to “democratize finance” by enabling anyone to buy and sell stocks and other securities. It was developed by two Stanford grads who built their own finance companies where they sold trading software to hedge funds. The app, which is designed to incentivize trading, makes trading simpler than ever. Robinhood transplants the stock market from the stuffy, befuddling environment of a traditional brokerage firm to your own personal smartphone. When a user makes a trade, an animation of confetti congratulates them, nudging them to keep trading. Robinhood’s design and objectives, combined with the economic effects of the pandemic, have prompted nascent investors to try their hand at the stock market. In the first quarter of 2020, Charles Schwab, TD Ameritrade, Etrade and Robinhood — the major online brokers — saw new accounts grow as much as 170 percent. The ease at which one can trade stocks is what allowed a group of Reddit users to wage an expensive attack on Wall Street.
Those on r/WallStreetBets started a trading frenzy, driving GME up 134 percent. On Jan. 11, GameStop announced three new directors to its board whose goals were to reposition GameStop in the modern video game retail environment; to save it from going under. For this reason, GME stock began to rise modestly. But once Redditors got a hold of it, its price rose so rapidly that they triggered automatic trading halts designed to stem market volatility.
Wide price swings and heavy volume fluctuations should prompt self-regulating organizations like the Nasdaq to take certain precautionary measures. But a bunch of lower-to middle-class citizens who decide to capitalize on financial literacy in any way they can — through a free subreddit rather than a pricey stock broker, for example — deserve access to the free market. Is this a battle between populists and institutions? Some of these “populists” have criticized those in the financial sector who have profited off of the coronavirus pandemic. The phrase “eat the rich” is quickly becoming a defining cultural statement; a memetic imitation of the frustration regarding 21st-century wealth inequality. Robinhood’s decision to restrict trading, effectively siphoning off profits from the everyman in favor of Wall Street hedge funds, is controversial.
Robinhood faces criticism on their trading restrictions not only from slighted day traders on Reddit, but also from Democratic and Republican politicians as well as the Securities and Exchange Commission (SEC). On Jan. 29, the commission released a statement that they will be investigating the situation with GameStop and that it will “closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.” Despite this, the Fed is not likely to get involved in the frenzy. For one thing, market fluctuations associated with GME, AMC and other similar stocks are not likely to impact the broader market. David Beckworth, an economist at George Mason University, said that fallout from GME means that “people would lose equity, but it wouldn’t lead to the problems of homes financed with mortgages and exotic mortgage securities.” In other words, the Fed has bigger fish to fry. Additionally, raising interest rates to change people’s expectations about the market would yield “a very high likelihood of causing a recession,” says Adam Posen, economics of the Peterson Institute for International Economics. “On the other hand, if you raise interest rates quite a bit, you are not by any means assured that you would pop the bubble.”
The SEC promises to investigate Robinhood’s actions; politicians continue to tweet angrily at Robinhood executives and their cohorts; the Fed can’t and likely won’t do much. So what can be done? The SEC could evaluate its leverage and reporting requirements on firms like Robinhood. Doing so would protect retail investors who serve as the app’s product, not its users. Robinhood employs an order flow payment model — they sell accumulated trading histories of retail clients to earn a substantial amount of its revenue in lieu of commissions. “On top of that, trades are executed in dark pools, which lack transparency and regulatory oversight,” said a representative from the International Financial Law Review. If their goal is really to empower “the next generation of investors to take charge of their financial futures,” then it should allow those who use it to execute the trades they want, even if Wall Street hedge funds lose some money and have to reevaluate their trading strategies. On the evening of Feb. 1, Robinhood released a statement saying that they “didn’t want to stop people from buying stocks and [they] certainly weren’t trying to help hedge funds.” Whether or not that is true, one thing remains clear: these disgruntled Wall Street investors simply have to learn how to adapt.
The La Salle Collegian 