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Elon Musk grills Robinhood CEO on Clubhouse app

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Yahoo Finance's Julia La Roche joined Yahoo Finance Live to discuss Elon Musk grilling Robinhood's CEO on the audio app Clubhouse.

Video Transcript

[MUSIC PLAYING]

ADAM SHAPIRO: We've been talking a lot about GameStop and the phenomenon of retail investors being able to stand up to big money. Julia La Roche knows a lot of people on both sides of that equation. We bring her into the stream, because even Elon Musk is giving Robinhood a grilling. What do you got for us, Julia?

JULIA LA ROCHE: Well, last night-- of course, if you heard about Clubhouse, it's the-- it's the voice chat app that is all the rage right now in Silicon Valley. Elon Musk joined one of those rooms last night, and it was basically a packed house, so packed that they had overflow rooms. You've seen some of these streams leak online.

And the real surprise was at the very end, Elon said, like, hey, do you guys want to hear from the Robinhood CEO explain what really happened? So that's how they kind of kicked off this conversation. And he was basically like, hey, man, spill the beans, like what really happened? And he grilled him around things like-- like was this shady? So for 14 minutes, the Robinhood CEO had to explain exactly what happened, especially with the clearing house side of the equation.

So some of the things that came up during that conversation was that Vlad Tenev, who, by the way, was on our air just on Friday explaining a lot of this to begin with, was sharing with Elon Musk that he-- look, he got this message at 3:30 in the morning Pacific time on Thursday from their operations team from the National Securities Clearing Corporation that they needed to put $3 billion up in deposit. But eventually, he had negotiated that down to $700 million.

But yeah, basically, he kept on-- Musk kept on pressing him like, look, the whole thing on-- well, you saw the order flow and is something shady going on here, in which he has refuted a lot of these conspiracy theories that have been floating around. But really fascinating conversation. We've talked about it really capturing the popular zeitgeist. And here you have a major CEO, the world's richest man, also someone who's been a critic of short selling, giving the Robinhood CEO a grilling.

SEANA SMITH: Yeah, Julia, there are so many interesting lines coming out of this discussion. The one thing that stood out to me, and you mentioned this in your article, was kind of going off what you were just saying with the National Security and Clearing Corporation, the NSCC, Musk asked kind of who controlled it or who was behind it. And Tenev actually defended the group's action, which stood out to me and I thought was-- I don't know if I would necessarily say it was surprising, but caught me off guard a little bit.

JULIA LA ROCHE: Yeah, it's interesting because I think-- I was trying to look into this. It's kind of, like, a quasi-regulator self kind of governing body. You have these in finance. And he was like, look, their request was reasonable from-- from the NSCC.

But he was also-- Musk was saying, well, you know, if it's not really a government regulatory agency but it's also a consortium, like who's part of this? Who gets to be part of it? But that's kind of unclear at this point. And he kind of said to Musk, look, you're kind of getting into those conspiracy theories that have been floating around there. Seana.

ADAM SHAPIRO: Actually, it's Adam. Julia La Roche, thank you very much, an evacuee--

JULIA LA ROCHE: Adam.

ADAM SHAPIRO: --from a blizzard here in Manhattan, enjoying the sunny shores of South Florida. We're not done, though, talking about what's going on with GameStop. And we've actually heard quite a bit about this earlier today. Chester Spatt, former SEC chief economist joined Yahoo Finance Live to discuss how the SEC and regulators should be responding to Robinhood and other stock market apps restricting trades for certain stock.

CHESTER SPATT: Well, the SEC indicated late last week that it's monitoring developments. And I think that's extremely important in the current situation. Some of the issues that you were just chatting about, namely the capital needs of-- of Robinhood and the necessity-- and the possible necessity of the trading limits that they imposed are certainly something the commission staff ought to be getting a handle on, understanding why-- what was the nature of the capital before this happened of Robinhood? Was it inadequately capital-- capitalized?

What do the restrictions that they've imposed mean, for example, restricting-- I'm not sure if I understand it, but restricting the gaming-- gaming stock to one share. What sort of bring-- what sort of brings about that particular restriction? I think these are all important to understand. And the regulator, at the same time, you know, may be interested in understanding whether the Redditors manipulated the markets to produce an artificial price. It seems to me all issues are on the table.

But these are issues for the staff, for them to explore. At this point, they don't seem to me to rise to the level of lawmakers already trying to do an autopsy. I think first, we have to let the SEC staff do an autopsy. And only later can lawmakers-- should lawmakers be debating possible changes in the regulatory framework. First, let's see what our regulatory framework did, and why did it do that, and to what extent were the actions of the market participants appropriate?

MYLES UDLAND: And you know, Chester, you brought up the issue of market manipulation. I'd love it if you could maybe briefly outline how the SEC goes about trying to define when a security has been manipulated. Because I think there's perhaps a popular misunderstanding that discussing a specific stock constitutes manipulation of that stock.

CHESTER SPATT: Well, I certainly-- I certainly wouldn't-- wouldn't think that discussing a particular stock would be manipulation. It's been a hard-- it's been a difficult issue for the commission to define. I think of manipulation in terms of attempts to create an artificial price. But I don't-- I don't think just communication, for example, that this stock is undervalued because there's a potential for do a short squeeze.