Vlad Tenev has been lying low in a hotel, seeking sanctuary from angry clients threatening his life. He will soon emerge to face the angry U.S. lawmakers threatening his business.
The chief executive officer of Robinhood Markets, who turned 34 over the weekend, must somehow calm critics across the political spectrum as he seeks to keep his Silicon Valley startup on track for a stock listing this year. He’s set to testify at a congressional hearing Thursday about the epic January rally in stocks such as GameStop Corp. that ended shortly after Robinhood temporarily restricted certain trading.
In recent days, Tenev has been avoiding going home after receiving death threats, according to a person with knowledge of the situation. Privately, the CEO has been making grim jokes about feeling hated, a nod to the tough audience of lawmakers who could make life harder for his firm.
“In every congressional hearing, in every news story, there’s a victim, villain and a vindicator,” said Gene Grabowski, a partner at crisis communications firm Kglobal. “He’s going to go in there automatically being the villain.”
A spokesperson for Robinhood declined to comment.
In a sense, Tenev has sped up the early life cycle of an emerging Silicon Valley darling displaying the now-familiar pattern of “build it first, beg forgiveness later.”
It wasn’t until Facebook Inc. was 14 years old that Congress first summoned founder Mark Zuckerberg for a grilling, in that case over a data-privacy scandal involving Cambridge Analytica. Tenev cut that time to about eight years, underscoring the heightened responsibility of handling customer investments.
Unlike Zuckerberg, who faced Congress solo, Tenev may take comfort in appearing virtually before the House Financial Services Committee with a group that includes billionaire Ken Griffin, whose firms—a market maker and a hedge fund—played different behind-the-scenes roles in January’s mania.
But Tenev is defending a less mature company. Robinhood has yet to stage an initial public offering, direct stock listing or merger with a blank-check investment vehicle—the three most likely ways that Robinhood could become a publicly traded company and pay off early backers.
Pressure For Listing
The need to do so became all the more acute during last month’s market mania. A campaign launched by retail investors on Reddit sent beaten-down stocks soaring, inflicting billions in losses on hedge funds shorting them. But Robinhood, one of the campaign’s preferred brokerages, proved ill-prepared for a $3 billion collateral call from the stock market’s main clearinghouse on Jan. 28. Robinhood abruptly limited bets on dozens of hot stocks, and after talking with the clearinghouse, met a reduced demand for $700 million.
Meanwhile, the firm drew hundreds of millions from bank credit lines and raised $3.4 billion from venture-capital firms to weather the storm. Iconiq Capital, which helps manage Zuckerberg’s fortune, was among those that threw Robinhood a lifeline.
“No doubt we could have communicated this a little bit better to customers,” Tenev told the “All-In” podcast last week. He noted that even before the fundraising, Robinhood met its deposit obligations. “And in order to relax them and eventually unrestrict them, we needed to raise some more capital,” which will help the brokerage keep growing.
Now, lawmakers in Washington are compiling lists of questions, as they prepare to examine how Robinhood handled the chaos of that volatile stretch. Another focal point in recent days has been how Robinhood generates revenue from sending client orders to market makers such as Griffin’s.
So far Tenev’s explanations haven’t beaten back online conspiracy theories or quelled users’ frustrations. He tried to demystify the role high-speed traders play behind the scenes, and he faulted the two-day process it takes to settle trades, proposing Wall Street adopt a real-time settlement system that would probably take years to develop.