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Can a Tech Giant Be Woke?

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The December day in 2021 that set off a revolution across the videogame industry appeared to start innocuously enough. Managers at a Wisconsin studio called Raven began meeting one by one with quality assurance testers, who vet video games for bugs, to announce that the company was overhauling their department. Going forward, managers said, the lucky testers would be permanent employees, not temps. They would earn an extra $1.50 an hour.It was only later in the morning, a Friday, that the catch became apparent: One-third of the studio’s roughly 35 testers were being let go as part of the overhaul. The workers were stunned. Raven was owned by Activision Blizzard, one of the industry’s largest companies, and there appeared to be plenty of work to go around. Several testers had just worked late into the night to meet a looming deadline.“My friend called me crying, saying, ‘I just lost my job,’” recalled Erin Hall, one of the testers who stayed on. “None of us saw that coming.”The testers conferred with one another over the weekend and announced a strike on Monday. Just after they returned to work seven weeks later, they filed paperwork to hold a union election. Raven never rehired the laid-off workers, but the other testers won their election in May 2022, forming the first union at a major U.S. video game company.It was at this point that the rebellion took a truly unusual turn. Large American companies typically challenge union campaigns, as Activision had at Raven. But in this case, Activision’s days as the sole decision maker were numbered. In January 2022, Microsoft had announced a nearly $70 billion deal to purchase the video game maker, and the would-be owners seemed to take a more permissive view of labor organizing.The month after the union election, Microsoft announced that it would stay neutral if any of Activision’s roughly 7,000 eligible employees sought to unionize with the Communications Workers of America — meaning the company would not try to stop the organizing, unlike most employers. Microsoft later said that it would extend the deal to studios it already owned.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Microsoft Agrees to Remain Neutral in Union Campaigns

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    The pledge is unprecedented for Big Tech and makes it easier for roughly 100,000 workers to unionize.Punctuating a year of major gains for organized labor, Microsoft has announced that it will stay neutral if any group of U.S.-based workers seeks to unionize.Roughly 100,000 workers would be eligible to unionize under the framework, which was disclosed Monday by Microsoft’s president, Brad Smith, and the A.F.L.-C.I.O. president, Liz Shuler, during a forum at the labor federation’s headquarters in Washington.The deal effectively broadens a neutrality agreement between Microsoft and a large union, the Communications Workers of America, under which hundreds of the company’s video game workers unionized early this year without a formal National Labor Relations Board election. Officially, it provides a framework in which any group of Microsoft workers can negotiate their own neutrality agreements with similar terms.As part of Monday’s announcement, Microsoft and the A.F.L.-C.I.O. said they would collaborate to resolve issues that arise from the adoption of artificial intelligence in the workplace.Mr. Smith and Ms. Shuler said the partnership would include meetings in which artificial intelligence experts from Microsoft brief labor leaders and workers on developments in the field. Microsoft’s experts will also seek input from workers so they can develop technology in a way that addresses their concerns, such as the risk of job elimination.The two sides said they would work together to help enact policies that would prepare workers for jobs that incorporate artificial intelligence.“Never before in the history of these American tech giants, dating back 50 years or so ago, has one of these companies made a broad commitment to labor rights,” Ms. Shuler said at the forum. “It is historic. Not only have they made a commitment, they formalized it and put it in writing.”Liz Shuler, president of A.F.L.-C.I.O., noted polling that found widespread concern among workers about losing their jobs because of artificial intelligence.Susan Walsh/Associated PressWorkers’ anxiety over artificial intelligence appears to have grown over the past few years. Hollywood writers and actors cited concerns about A.I. as a key reason for their monthslong strikes this year, while Ms. Shuler pointed to recent polling showing widespread concern among workers that artificial intelligence could cost them their jobs.“I can’t sit here and say it will never displace a job,” Mr. Smith said at the forum, alluding to artificial intelligence. “I don’t think that would be honest.” But he added that “the key is to try to use it to make jobs better,” saying the technology could eliminate tasks that people consider tedious.The unveiling of the A.I. initiative comes a few weeks after the board of the start-up OpenAI, which makes ChatGPT, fired the company’s chief executive, Sam Altman, only to accept his reinstatement days later. The episode added to widespread concerns over how to ensure that companies develop and deploy artificial intelligence safely.Microsoft is OpenAI’s biggest investor and played a role in reinstating Mr. Altman.Asked if the OpenAI controversy was an impetus for the new partnership with organized labor, Mr. Smith demurred and said the labor initiative had been in the works for months.“I wouldn’t say what happened in the board room at OpenAI changed it,” he said in an interview after Monday’s forum. “But it raised questions about how A.I. is governed and perhaps it gave even more credence to the kind of partnership we’re announcing today.”When Microsoft announced a neutrality agreement with the communications workers union in June 2022, the offer was conditional: The company was in the process of acquiring the video game maker Activision Blizzard for nearly $70 billion. Microsoft pledged to stay neutral in union elections at Activision if the acquisition succeeded. (The acquisition has since been completed.)The key to artificial intelligence, said Brad Smith, Microsoft’s president, is “to try to use it to make jobs better.”Michael A. McCoy for The New York TimesA few months later, when roughly 300 workers sought to unionize at ZeniMax Media, a video game company owned by Microsoft, Microsoft agreed to abide by the neutrality agreement in that case as well. The agreement allowed them to indicate their preference for a union either by signing authorization cards or anonymously through an electronic platform, a more efficient process than an N.L.R.B. election.The 300 employees unionized — a rarity in Big Tech — and are negotiating a labor contract that includes language restricting the use of A.I. in their workplace.The Communications Workers of America is one of several dozen unions affiliated with the A.F.L.-C.I.O., the country’s largest labor federation. After the ZeniMax campaign, communications union officials believed that Microsoft would probably agree to stay neutral if the union sought to organize workers elsewhere at the company. But Microsoft had never explicitly agreed to do so beyond Activision or ZeniMax. More

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    The Upshot of Microsoft’s Activision Deal: Big Tech Can Get Even Bigger

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    President Biden’s top antitrust officials have used novel arguments over the past few years to stop tech giants and other large companies from making deals, a strategy that has had mixed success.But on Friday, when Microsoft closed its blockbuster $69 billion acquisition of the video game publisher Activision Blizzard after beating back a federal government challenge, the message sent by the merger’s completion was incontrovertible: Big Tech can still get bigger.“Big Tech companies will certainly be reading the tea leaves,” said Daniel Crane, a law professor at the University of Michigan. “Smart money says merge now while the merging is good.”Microsoft’s purchase of Activision was the latest deal to move forward after a string of failed challenges to mergers by the Federal Trade Commission and the Justice Department, which are also confronting the big tech companies through lawsuits arguing they broke antimonopoly laws. Leaders at the two agencies had tried to block at least 10 other deals over the past two years, promising to dislodge longstanding ideas from antitrust law that they said had protected behemoths like Microsoft, Google and Amazon.But their efforts ran headlong into skeptical courts, largely leaving those core assumptions untouched. In the case of Microsoft’s Activision deal, the idea that the F.T.C. questioned was a “vertical” transaction, which refers to mergers between firms that are not primarily direct competitors. Regulators have rarely sued to block such deals, figuring that they generally do not create monopolies.Yet “vertical” deals have been especially common in the tech industry, where companies like Meta, Apple and Amazon have sought to grow and protect their empires by spreading into new business lines.In 2017, for instance, Amazon bought the high-end grocery chain Whole Foods for $13.4 billion. In 2012, Meta acquired the photo-sharing app Instagram for $1 billion and then shelled out nearly $19 billion for the messaging service WhatsApp in 2014. Of the 24 deals worth more than $1 billion completed by the tech giants from 2013 to mid-August of this year, 20 were vertical transactions, according to data provided by Dealogic.The sealing of the Microsoft-Activision deal has buttressed the notion that vertical deals generally are not anticompetitive and can still go through relatively unscathed.“There continues to be the presumption that vertical integration can be a healthy phenomena,” said William Kovacic, a former chair of the F.T.C. The F.T.C. is proceeding with its challenge to the Microsoft-Activision deal even as it has closed, said Victoria Graham, a spokeswoman for the agency, who added that the acquisition was a “threat to competition.” The Justice Department declined to comment. The White House did not immediately have a comment.The idea that vertical transactions were less likely to harm competition than combinations of direct rivals has been ingrained since the late 1970s. In the ensuing decades, the Justice Department and F.T.C. took no challenges to vertical deals to court, instead reaching settlements that allowed companies to proceed with their deals if they changed practices or divested parts of their business.Then, in 2017, the Justice Department sued to block the $85.4 billion merger between the phone giant AT&T and the media company Time Warner, in the agency’s first attempt to stop a vertical deal in decades. A judge ruled against the challenge in 2018, saying he did not see enough evidence of anticompetitive harms from the union of companies in different industries.Mr. Biden’s top antitrust officials — Lina Khan, the F.T.C. chair, and Jonathan Kanter, the top antitrust official at the Justice Department — have been even more aggressive in challenging vertical mergers since they were appointed in 2021.That year, the F.T.C. sued to stop the chip maker Nvidia from buying Arm, which licenses chip technology, and the companies abandoned the deal. In January 2022, the F.T.C. announced it would block Lockheed Martin’s $4.4 billion acquisition of Aerojet Rocketdyne Holdings, a missile propulsion systems maker. The companies dropped their merger.But judges rejected many of their efforts for lack of evidence and denied Ms. Khan and Mr. Kanter a courtroom win that would have set new precedent. In 2022, after the D.O.J. sued to block UnitedHealth Group’s acquisition of Change Healthcare, a judge ruled against the agency.Lina Khan, the chair of the Federal Trade Commission, challenged Microsoft’s deal for Activision last year. Tom Brenner for The New York TimesThe F.T.C.’s move to block Microsoft’s purchase of Activision last year was a bold effort by Ms. Khan, given that the two companies do not primarily compete with one another. The agency argued that Microsoft, which makes the Xbox gaming console, could harm consumers and competition by withholding Activision’s games from rival consoles and would also use the deal to dominate the young market for game streaming.To show that would not be the case, Microsoft offered to make one of Activision’s major game franchises, Call of Duty, available to other consoles for 10 years. The company also reached a settlement with the European Union, promising to make Activision titles available to competitors in the nascent market for game streaming, which allowed the deal to go through.In July, a federal judge ultimately ruled that the F.T.C. didn’t provide enough evidence that Microsoft intended to forestall competition through the deal and that the software giant’s concession eliminated competition concerns.The agencies are “facing judges who have said 40 years of economics show that vertical mergers are good,” said Nancy Rose, a professor of applied economics at M.I.T. with an expertise in antitrust, who is among a group of scholars who say vertical deals can be harmful to competition. She said the agencies should not back down from challenging vertical mergers, but that regulators would need to be careful to choose cases they can prove with an abundance of evidence.Ms. Khan and Mr. Kanter have said they are willing to take risks and lose lawsuits to expand the boundaries of the law and spark action in Congress to change antitrust rules. Ms. Khan has noted that the F.T.C. has successfully stopped more than a dozen mergers.Mr. Kanter has said that challenges to mergers from the Justice Department and the F.T.C. have deterred problematic deals.“There are fewer problematic mergers that are coming to us in the first place,” he said in a speech at the American Economic Liberties Project, a left-leaning think tank, in August.Still, bigger companies that have the resources to fight back will probably feel more confident challenging regulators after the Microsoft-Activision deal, antitrust lawyers said. The aggressive posture by regulators has simply become the cost of doing business, said Ryan Shores, who led tech antitrust investigations at the D.O.J. during the Trump administration and is now a partner at the law firm Cleary Gottlieb.“A lot of companies have come to the realization that if they have a deal they want to get through, they have to be prepared to litigate,” he said. More

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    F.T.C. Chair Lina Khan Upends Antitrust Standards by Suing Meta

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    Lina Khan may set off a shift in how Washington regulates competition by filing cases in tech areas before they mature. She faces an uphill climb.WASHINGTON — Early in her tenure as chair of the Federal Trade Commission, Lina Khan declared that she would rein in the power of the largest technology companies in a dramatically new way.“We’re trying to be forward looking, anticipating problems and taking fast action,’’ Ms. Khan said in an interview last month. She promised to focus on “next-generation technologies,” and not just on areas where tech behemoths were already well established.This week, Ms. Khan took her first step toward stopping the tech monopolies of the future when she sued to block a small acquisition by Meta, the company formerly known as Facebook, of the virtual-reality fitness start-up Within. The deal was significant for Meta’s development of the so-called metaverse, which is a nascent technology and far from mainstream.In doing so, Ms. Khan upended decades of antitrust standards, potentially setting off a wholesale shift in the way Washington enforces competition across corporate America. At the heart of the F.T.C.’s lawsuit is the idea that regulators can apply antitrust law without waiting for a market to mature to the point where it is clear which companies hold the most power. The F.T.C. said such early action was justified because Meta’s deal would probably eliminate competition in the young virtual-reality market.Since the late 1970s, most federal challenges to mergers have been in large, well-established markets and aim to prevent already clear monopolies. Regulators have mostly rubber-stamped the purchases of start-ups by tech giants, such as Google’s 2006 deal to buy YouTube and Facebook’s 2012 acquisition of Instagram, because those markets were still emerging.As a result, Ms. Khan faces an uphill climb. Regulators have been reluctant to try to stop corporate mergers by relying on the theory that competition and consumers will be harmed in the future. The federal government lost at least two cases that used this strategy in the past decade, including an attempt to block a $1.9 billion merger in 2015 among X-ray sterilization providers that the F.T.C. had predicted would harm future competition in regional markets.The F.T.C.’s lawsuit against Meta in the budding virtual-reality market is a “deliberately experimental case that seeks to extend the boundaries of merger enforcement,” said William Kovacic, a former chair of the agency. “Such cases are certainly harder to win.”The F.T.C.’s action immediately caused a ruckus within antitrust circles and across the tech industry. Silicon Valley tech executives said that moving to block a deal in an embryonic area of technology might stifle innovation and spook technologists from taking bold leaps in new areas.“Regulators predicting future markets is a very, very dangerous precedent and position,” said Aaron Levie, the chief executive of the cloud storage company Box. He warned that venture capitalists and entrepreneurs would become wary of going into new markets if regulators cut off the ability of companies like Meta to buy start-ups.Adam Kovacevich, the president of the trade group Chamber of Progress, which represents Meta, Amazon and Alphabet, also said the lawsuit would have a chilling effect on innovation.Read More on Facebook and MetaA New Name: In 2021, Mark Zuckerberg announced that Facebook would change its name to Meta, as part of a wider strategy shift toward the so-called metaverse that aims at introducing people to shared virtual worlds.Morphing Into Meta: Mr. Zuckerberg is setting a relentless pace as he leads the company into the next phase. But the pivot  is causing internal disruption and uncertainty.Zuckerberg’s No. 2: In June, Sheryl Sandberg, the company’s chief financing officer announced she would step down from Meta, depriving Mr. Zuckerberg of his top deputy.Tough Times Ahead: After years of financial strength, the company is now grappling with upheaval in the global economy, a blow to its advertising business and a Federal Trade Commission lawsuit.“This is such an extreme and unfounded reaction to a small deal that many tech industry leaders are already worrying about what an F.T.C. win would mean for start-ups,” he said.For Ms. Khan, winning the lawsuit may be less of a priority than showing it’s possible to file against a tech deal while it is still early. She has said regulators were too cautious in the past about intervening in mergers for fear of harming innovation, allowing a wave of deals between tech giants and start-ups that eventually cemented their dominance.“What we can see is that inaction after inaction after inaction can have severe costs,” she said in an interview with The New York Times and CNBC in January. “And that’s what we’re really trying to reverse.”Ms. Khan declined requests for an interview for this article, and the F.T.C. declined to comment on Thursday.Mark Zuckerberg, Meta’s chief executive, testifying on Capitol Hill in 2019. He has bet the company on the metaverse, a technology frontier.Pete Marovich for The New York TimesMeta said the F.T.C. was applying antitrust law incorrectly. The lawsuit focuses on how the merger with Within would remove competition, but Meta said the agency was ignoring the large number of companies that also had health and fitness apps.“The F.T.C. has no answer to the most basic question — how could Meta’s acquisition of a single fitness app in a dynamic space with many existing and future players possibly harm competition?” Nikhil Shanbhag, Meta’s vice president and associate general counsel, wrote in a blog post.The company added that it hadn’t decided on whether to challenge the lawsuit, which was filed on Wednesday in U.S. District Court for the Northern District of California.The F.T.C. accused Meta of building a virtual reality “empire,” beginning in 2014 with its purchase of Oculus, the maker of the Quest virtual-reality headset. Since then, Meta has acquired around 10 virtual-reality app makers, such as the maker of a Viking combat game, Asgard’s Wrath, and several first-person shooter and sports games.By buying Within and its Supernatural virtual-reality fitness app, the F.T.C. said, Meta wouldn’t create its own app to compete and would scare potential rivals from trying to create alternative apps. That would hobble competition and consumers, the agency said.“This acquisition poses a reasonable probability of eliminating both present and future competition,” according to the lawsuit. “And Meta would be one step closer to its ultimate goal of owning the entire ‘Metaverse.’”Rebecca Haw Allensworth, a professor of antitrust law at Vanderbilt University, said the F.T.C.’s arguments would face tough scrutiny because Meta and Within did not compete with each other and because the virtual-reality market was fledgling.“The way that merger analysis has stood for at least 40 years is about what kind of head-to-head competition does this merger take out of the picture,” she said.The onus will now be on the agency to convince a judge that its predictions about the metaverse and Meta’s purchase would harm competition.“The burden is on the F.T.C. to show, among other things, reasonable probability that Meta would have entered the V.R.-dedicated fitness apps market, absent its acquisition of Within,” said Diana Moss, president of the American Antitrust Institute.If the court dismisses the case, Ms. Khan may have created a precedent that would make it harder to pursue nascent competition cases, antitrust experts cautioned. That could then embolden tech giants to acquire their way into new lines of businesses.“This is a precedential system which goes both ways — if you win or lose — and sends a signal to the market,” Ms. Allensworth said.The F.T.C. is reviewing other tech deals, including Microsoft’s $70 billion acquisition of the gaming company Activision and Amazon’s $3.9 billion merger with One Medical, a national chain of primary care clinics. In addition, the agency has been investigating Amazon on claims of monopoly abuses in its marketplace of third-party sellers.Ms. Khan appears to be prepared for long legal battles with the tech giants even if the cases do not end up going the F.T.C.’s way.In her earlier interview with The Times and CNBC, she said, “Even if it’s not a slam-dunk case, even if there is a risk you might lose, there can be enormous benefits from taking that risk.” More

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    Robinhood's C.E.O., Vlad Tenev, Is in the Hot Seat

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    #masthead-section-label, #masthead-bar-one { display: none }GameStop vs. Wall StreetCharting the Wild Stock SwingsWhat’s GameStop Really Worth?Your TaxesReader’s GuideAdvertisementContinue reading the main storySupported byContinue reading the main storyRobinhood’s C.E.O. Is in the Hot SeatVlad Tenev has incited the fury of the trading app’s fans amid a stock market frenzy. His lack of preparedness on nuts-and-bolts issues was part of a pattern, former employees and analysts said.Vlad Tenev, co-founder of Robinhood, at the company’s Silicon Valley headquarters in 2015.Credit…Winni Wintermeyer/ReduxNathaniel Popper, Kellen Browning and Feb. 2, 2021Updated 3:06 p.m. ETSAN FRANCISCO — Vlad Tenev, the chief executive of the online brokerage Robinhood, has had practice doing damage control.Last March, he told customers that “we owe it to you to do better” after Robinhood’s app suffered lengthy outages, leaving many people unable to trade.In June, he wrote in a blog post that he was “personally devastated” and wanted to improve the “customer experience” after a 20-year-old who had a negative $730,000 balance on the app killed himself.And in December, when federal regulators fined his company $65 million for misleading users about how it made money, he said the accusations “don’t reflect Robinhood today.”Mr. Tenev, 33, is now in the hot seat again after Robinhood abruptly curtailed its customers’ trading last week amid a frenzy in stocks such as GameStop, which were driven sky high by an army of online investors. The limits infuriated Robinhood’s users, who were locked out of the action, and the seven-year-old start-up was blasted by lawmakers and others, accused of acting unfairly toward ordinary investors.For days, Robinhood was slow to fully explain why it had curbed people from trading the stocks. Only later did Mr. Tenev disclose that Robinhood had put in restrictions because it did not have enough of a cash cushion to hedge against the risky trades. To increase that cushion and avoid further problems, Robinhood raised an emergency $1 billion last week, followed by an additional $2.4 billion this week.On Sunday, Mr. Tenev told Elon Musk in an impromptu interview on the online conversation app Clubhouse that he knew that Robinhood’s trading curbs were “a bad outcome for customers.” He said the entire experience had been challenging, “but we had no choice in this case.”It was no surprise that Robinhood got caught unawares over the past week, current and former Robinhood employees and analysts said. While Mr. Tenev has helped revolutionize online trading for a younger generation with an app that makes investing easy and fun, his start-up has repeatedly been ill prepared to deal with issues as commonplace as technology glitches and trading hiccups, they said.Many start-ups go through growing pains. But “there’s a consistent pattern which makes one question whether he knows what is going on inside his company,” Vijay Raghavan, an analyst at Forrester Research who covers Robinhood and other brokers, said of Mr. Tenev. Lawmakers and some of Robinhood’s users have been even harsher on the chief executive. Representative Alexandria Ocasio-Cortez, Democrat of New York, and Senator Ted Cruz, Republican of Texas, have slammed Robinhood for freezing users’ ability to buy GameStop stock. Mr. Tenev has agreed to testify about the issue in Congress on Feb. 18.Even some of Robinhood’s biggest promoters have turned against Mr. Tenev. Dave Portnoy, the founder of Barstool Sports and a high-profile Robinhood supporter, wrote over a picture of Mr. Tenev on Twitter last week: “Fraud, liar, Scumbag.”Robinhood, a privately held company in Menlo Park, Calif., declined to make Mr. Tenev available for an interview. But Jason Warnick, the chief financial officer, said Mr. Tenev had widespread support internally.“When I watched Vlad, there is absolutely no one else I would want to be with,” Mr. Warnick said about the events of the last week. “He mobilized us in an incredibly effective way.”Venture capitalists who have backed Robinhood, which is valued at nearly $12 billion and is likely to go public this year, also said they had confidence in Mr. Tenev. Rahul Mehta, a partner at the venture firm DST Global, said the speed with which Mr. Tenev had raised the emergency $3.4 billion over the past few days “shows you the support around the table and the belief people have, in particular, for Vlad.”Mr. Tenev, who moved to the United States from Bulgaria when he was 5 and grew up in the Washington, D.C., area, founded Robinhood with Baiju Bhatt in 2013. The two met while studying math at Stanford University.After graduating from Stanford in 2008, Mr. Tenev attended the University of California, Los Angeles, to pursue a Ph.D. in math but dropped out to work with Mr. Bhatt. The pair initially had two other business ventures, including a Wall Street trading firm.But those were short-lived. Instead, inspired by the Occupy Wall Street movement in 2011 — which took aim at the power of the big banks — they began talking about how to “democratize finance” for everyone by ending the fees that most brokerages charged to trade stocks. They named Robinhood after the English outlaw of legend who stole from the rich and gave to the poor.In particular, Mr. Tenev and Mr. Bhatt wanted an app that a younger generation could easily use. “People in my age group, the millennials, weren’t getting into the markets and were openly distrustful of the institutions that were providing financial services,” Mr. Tenev said on CNBC in 2015.Mr. Tenev with his Robinhood co-founder, Baiju Bhatt.Credit…Aaron Wojack for The New York TimesMr. Tenev and Mr. Bhatt, who were co-chief executives, made Robinhood simple. Users were able to begin trading stocks with nothing more than an iPhone app and with no fees. The app also made trading feel like a game. New customers were given a free share of stock after scratching off what looked like a digital version of a lottery ticket.The men sought out celebrity investors like the actor Jared Leto and the rapper Snoop Dogg. The co-C.E.O.s often showed up at the office with matching Tesla sport utility vehicles, one black and one white, two former employees said.Inside Robinhood, Mr. Tenev was known as the cerebral coder in charge of operations, said six current and former employees, who spoke on the condition of anonymity. He was known for sitting down at lunch with employees to talk about books or his latest theories from science fiction. Mr. Bhatt was more fun-loving and handled design, they said.Both were active on social media, with Mr. Tenev tweeting emoji-filled, jokey replies to Mr. Musk. Mr. Bhatt broadcast pictures of themselves from floor seats at Golden State Warriors basketball games.As Robinhood grew quickly, though, so did the blunders. In 2018, the company announced that it would begin offering bank accounts. But it had not secured approval from financial regulators, which is standard practice, earning the start-up a swift rebuke.That same week, Robinhood released software that erroneously reversed the direction of customer trades, which meant that a bet on a stock going up was turned into a bet that it would go down. Mr. Tenev oversaw technology.Technological issues continued piling up. In 2019, customers discovered that Robinhood’s software accidentally allowed them to borrow almost infinite amounts of money to multiply their stock bets. Last March, as the pandemic hit the United States and the stock market gyrated wildly, Robinhood’s app seized up for almost two days, leading some customers to lose more than $1 million.That was when Mr. Tenev said in a blog post that “we owe it to you to do better.” By then, Robinhood had more than 13 million customers.Mr. Warnick and other employees said Mr. Tenev had a knack for staying calm during difficult situations. “He doesn’t get emotional,” Mr. Warnick said.But five current and former Robinhood employees said Mr. Tenev moved quickly to new projects without fixing the previous problems. After the March outages, they said, Mr. Tenev told the company that it would significantly ramp up its infrastructure and customer support. Yet almost a year later, the start-up does not offer a customer service phone number, unlike its competitors.Robinhood did not respond to a request for comment on the customer service issues.Last year, Mr. Bhatt stepped down as co-chief executive after returning from paternity leave, leaving Mr. Tenev in charge. Mr. Bhatt remains an executive and is on the company’s board of directors.Robinhood’s technical outages have continued. Last month, the site went down 19 times, more than twice as often as Charles Schwab or Fidelity, according to data from the web tracking company DownDetector. Mr. Tenev has recently kept a low profile. Last year, he said in a podcast interview that he keeps his phone out of his bedroom at night to avoid being tempted to check social media.But over the last week, as the mania over GameStop stock grew and Robinhood was forced to react, Mr. Tenev had little choice but to step out more. He has appeared on television at least eight times from the sparsely decorated living room of the home where he lives with his wife and children.In most of the appearances, Mr. Tenev used technical language and shifted quickly to talk about Robinhood’s moving forward to another stage of expansion.“This is just a standard part of practices in the brokerage industry,” he told Yahoo Finance last Friday, referring to the decision to temporarily halt some purchases. “We’re very confident about our future.”Kitty Bennett contributed research.AdvertisementContinue reading the main story More

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    The ‘Roaring Kitty’ Rally: How a Reddit User and His Friends Roiled the Markets

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    #masthead-section-label, #masthead-bar-one { display: none }GameStop vs. Wall StreetBeating Wall Street4 Things to KnowUnderstanding Stock OptionsA Long Time ComingAdvertisementContinue reading the main storySupported byContinue reading the main storyThe ‘Roaring Kitty’ Rally: How a Reddit User and His Friends Roiled the MarketsA Massachusetts man who goes by ‘Roaring Kitty’ on social media helped fuel the frenzy around GameStop. His $53,000 investment in the company briefly reached $48 million in value.Credit…Max-o-maticNathaniel Popper and Jan. 29, 2021, 5:00 a.m. ETIn mid-2019, a Reddit user — known as “Roaring Kitty” on some social media accounts — posted a picture on an online forum depicting a single $53,000 investment in the video-game retailer GameStop.The post attracted little attention, except from a few people who mocked the bet on the struggling company. “This dude should sell now,” a Reddit user named cmcewen wrote at the time.But Roaring Kitty was not deterred. Over the next year, he began tweeting frequently about GameStop and making YouTube and TikTok videos about his investment. He also started livestreaming his financial ideas. Other Reddit users with monikers like Ackilles and Bowlerguy92 began following his every move and piling into GameStop.“IF HE IS IN WE ARE IN💎💎💎,” one user wrote on a Reddit board called WallStreetBets on Tuesday.Roaring Kitty — who is Keith Gill, 34, a former financial educator for an insurance firm in Massachusetts — has now become a central figure in this week’s stock market frenzy. Inspired by him and a small crew of individual investors who gathered around him, hordes of young online traders took GameStop’s stock on a wild ride, pitting themselves against sophisticated hedge funds and upending Wall Street’s norms in the process.Their actions — pushing up GameStop’s price by buying so-called options contracts that offer a cheap way to bet on a stock’s direction — have shocked established investors because Mr. Gill and his online comrades are the antithesis of the Wall Street titans who have long ruled the stock market.A screenshot of Keith Gill from his Roaring Kitty’s YouTube channel.Credit…via YoutubeWorking far from well-heeled financial offices, Mr. Gill and his fans socialized on Reddit and YouTube and used no-fee online trading platforms like Robinhood and WeBull. Many were so devoted to their GameStop investment that they spent hours each week chatting in the comments section of Mr. Gill’s videos, delving into the company’s financial filings and arcane details about free-cash flow and video game consoles.Their show of force this week underlines how the financial markets have changed by merging with the world of social media and a younger generation of traders who have been empowered by online platforms. It has also made some in this new generation wildly wealthy.On Tuesday, Mr. Gill posted a picture on Reddit that showed his $53,000 bet on GameStop had soared in value to $48 million. (His holdings could not be independently verified.) The post was “upvoted” — the equivalent of being liked — more than 140,000 times by other users. GameStop, which traded at $4 a year ago, closed on Thursday at $193 after reaching more than $480 earlier in the day.“Your example has literally changed the lives of thousands of ordinary normal people,” a Reddit user named reality_czech wrote this week to Mr. Gill. “Seriously thank you.”Larry Tabb, the head of market structure research at Bloomberg Intelligence, said the rise of traders like Mr. Gill “would have been impossible even a few years ago” because every trade came with a fee and there was less focus on the markets on social media. But with people now stuck at home in the pandemic with easy access to free trading at online brokerages, “these guys saw an opportunity and they took it,” he said.Mr. Gill did not respond to requests for comment. His online accounts and email addresses were tied to his old office in New Hampshire and his Massachusetts home. Mr. Gill’s mother, Elaine, confirmed in a brief phone call that her son was Roaring Kitty.“I’m proud,” she said, before hanging up.Mr. Gill’s life as Roaring Kitty began in 2014 when he started a limited liability company with that name. Before that, he was an All American runner in college who could cover a mile in 4 minutes 3 seconds, according to local newspapers. After graduating, he worked as a chartered financial accountant and a financial wellness educator, a recently deleted LinkedIn profile showed.In August 2019, he began posting on Reddit. Like many other Reddit users, he showed familiarity with memes and internet expressions like YOLO (you only live once) and exhibited a love for profanity. The middle letter of the acronym of his Reddit username, DFV, refers to an expletive. On YouTube, TikTok and Twitter, he went by Roaring Kitty.Mr. Gill’s first posts on WallStreetBets showed the screenshot of his E-Trade portfolio with the options trades he had made on GameStop, all of them betting the stock would go up. In the comments, he explained that Wall Street did not appreciate how much GameStop would benefit as new video game consoles were released.Shortly after Mr. Gill placed his trades, Michael Burry, an investor made famous by the Michael Lewis book “The Big Short,” also expressed interest in GameStop. On Reddit, Mr. Gill pointed to Mr. Burry’s post as validation. When others questioned the investment, Mr. Gill held firm.“Dude everyone thinks I’m crazy, and I think everyone else is crazy,” he responded to a commenter when GameStop announced sales had dropped 30 percent in late 2019.Last summer, Mr. Gill started a Roaring Kitty channel on YouTube where he talked for hours about GameStop. He had 418 YouTube subscribers through last November, according to the web tracking firm SocialBlade.In one of his first YouTube videos, he wondered aloud, “Maybe there’s going to be no one tuning in, so this is silly.”He explained that to avoid disturbing his 2-year-old daughter, he was filming in a basement room called the “Kitty Corner,” with a stuffed animal cat on the doorknob.Fast-talking and cracking jokes in between analyzing stocks, Mr. Gill sipped beer, brandished cigars and told viewers he sometimes used a Magic 8-Ball to guide his investments. He often wore a baseball cap over his long hair and a T-shirt with a cat in sunglasses.The comments section of his videos soon became a gathering place for a small group of other GameStop fans. One YouTube follower, Joe Fonicello, known as Toast on Twitter, said he tuned in from an old van that he was traveling across the country in with his girlfriend.Mr. Gill often posted pictures of his GameStop investment.Credit…via Youtube“She thought I was crazy until she heard the thesis” for what GameStop could be worth, said Mr. Fonicello, 21, who said he and his girlfriend’s investment in the stock has grown to over $250,000 this week from less than $10,000 originally.Mr. Fonicello said chatting with Mr. Gill and others online was not just about money. “What went from a great few hours of stock analysis turned into a few hours of just spreading positivity,” he said.Last August, Ryan Cohen, the founder of the pet food site Chewy.com, announced that he had taken a big stake in GameStop. A few weeks later, Mr. Gill’s investment hit $1 million, according to pictures he posted of his portfolio.Through financial filings, Mr. Gill’s crew also discovered that hedge funds such as Point72 and Citron Capital were betting that GameStop’s price would fall, in a maneuver known as short-selling. That angered them.“That’s your ignition switch. A common enemy, so to speak,” said Rod Alzmann, 31, a corporate strategist in Florida who has bet on GameStop for even longer than Mr. Gill and posted online as Uberkikz11. “The speculation is a rush, plus fighting the man.”In December, Mr. Gill’s wife made a cameo on YouTube when her hand appeared on a livestream to clink glasses with him to celebrate GameStop’s stock reaching $20. Mr. Gill wore a pink party hat and sunglasses and sipped what appeared to be champagne.“I certainly do not drive a Lambo,” he said in the video, referring to a Lamborghini. “We rent this house that you see, so it’s been a wild ride for us as a family.”Earlier this month, Mr. Cohen joined GameStop’s board. That caused the company’s stock to rise, enriching Mr. Gill and others. When Mr. Gill showed another picture of his investment on Jan. 13, some of the 44,200 people who looked at the post said his decision not to cash out even a penny of GameStop kept them going.“Daddy’s still in!” said a Reddit user named freehouse_throwaway. “Feels so good.”Late last week, 190,000 viewers tuned in to the Roaring Kitty YouTube channel, which now has more than 74,000 subscribers, as Mr. Gill, in a red bandanna and sunglasses, said he would be stepping away “for a bit.” That day, he livestreamed for seven hours while watching a chart of GameStop’s surging stock, laughing and calling out to longtime comrades in the comments.On Thursday, several online brokerages shut down trading in GameStop, causing the company’s price to plunge by almost two-thirds before steadying. Even ardent supporters wondered if Mr. Gill had finally caved and sold.Mr. Gill then posted another picture on Reddit showing he had stayed firm — and had lost $15 million. His fans cheered.“IF HE’S STILL IN, I’M STILL IN,” over 100 different followers responded in quick succession.Kitty Bennett contributed research.AdvertisementContinue reading the main story More