Confusion, Finger Pointing Remain After Wild Ride Of GameStop Shares
STEVE INSKEEP, HOST:
The stock market madness that started with GameStop is subsiding. The conversation about GameStop goes right on. The sudden rise of a seemingly unattractive stock was blamed on enthusiasts who encouraged each other online through Reddit, believing they were sticking it to the man, short selling hedge fund managers. Yet NPR's Ryan Kailath reports that some observers also ask questions about the role of a hedge fund manager.
RYAN KAILATH, BYLINE: Ken Griffin, the founder and CEO of Citadel, a major investment firm - Griffin's been a major player on Wall Street for 30 years - giant political donor - big enough that when President Trump invited him to a White House event last year with a pantheon of corporate titans, Griffin didn't show.
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DONALD TRUMP: Ken Griffin - Citadel - what a guy he is. Where are you, Ken? Where the hell is he? He's trying to hide his - some of his money. Look, he doesn't want to stand up. Where the hell is Ken?
KAILATH: Where the hell is Ken? Turns out, kind of everywhere. Citadel plays in almost every corner of the financial system. So after the recent GameStop meme stock madness, a number of the conspiracy-minded are connecting dots back to Ken Griffin. For one, Citadel has a hedge fund - hedge fund of the year, according to one award. And I still have to look this up myself, so...
JAMES ANGEL: Hedge fund is just an investment company in a wide variety of different things. There's no one hedge fund strategy.
KAILATH: Some of them are disciplined strategic investors, says Georgetown finance professor James Angel.
ANGEL: And some of them, quite frankly, are riverboat gamblers.
KAILATH: Angel says, just by virtue of having a successful hedge fund, CEO Ken Griffin has a target on his back for the ire of the extremely online investor. Citadel didn't respond when NPR asked for comment. Browse through the forum WallStreetBets, and you'll find hundreds of messages about Griffin as the enemy, the man of the proverbial sticking it to. When a different hedge funder lost big in the GameStop debacle, Griffin and another player stepped in to bail him out to the tune of $2,750,000,000. Another arm of his company is woven into the very structure of the markets. It's called a market-maker.
ANGEL: And what market-makers do is basically what used car dealers do.
KAILATH: They buy your car - or stock - for the lowest price they can, put it out on the lot and try to sell it for the highest price they can. With stocks, the difference is usually a penny or two.
ANGEL: That's what market-makers do. They sell convenience to investors, and that's the part of Citadel that is buying the order flow from Robinhood and many other retail investors.
KAILATH: Citadel has one of the biggest used car lots on the market. It makes a penny or two on trillions of trades. So when trading activity and volume went to the moon last week, Citadel raked in oceans of pennies. Wherever there's been crazy stock market action these past two weeks, Ken Griffin's company was there. Case in point - Treasury Secretary Janet Yellen has called a meeting to discuss the meme stock situation. And according to Reuters, she needs a special ethics waiver to do it because, over the years, she's taken hundreds of thousands in speaking fees from Citadel.
Ryan Kailath, NPR News. Transcript provided by NPR, Copyright NPR.