Ken Griffin on Unfettered Conversations with A and Z | a16z Live

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Intro

  • Ken Griffin is the CEO of the investment firm, Citadel. Ken joined an a16z live Clubhouse conversation to discuss his perspective on the GameStop saga and his winning bid for the US Constitution in the auction against ConstitutionDAO.
  • Host: Marc Andreessen (@pmarca)

Citadel and GameStop Refresher

  • January 25th, 2021: Citadel invests $2 billion into Melvin Capital, a hedge fund that had suffered roughly a 30% loss on a GameStop short position
  • January 28th, 2021: Robinhood halted purchases of GameStop securities, resulting in a steep decline in price
    • Robinhood receives a substantial portion of revenues from a payment-for-order-flow relationship with Citadel
    • Potential conflict of interest- an entity serving as maker and participant

Ken Griffen’s Perspective

  • “The day we invested in Melvin, we thought it had run its course” – Ken Griffen
    • By the 28th, Melvin had already covered their short, taken the loss, and moved on
    • Ken points the finger at social media influencers for continued support
      • Retail investors realized the unduly sized short positions in the marketplace
  • “Robinhood had a problem of too much success” – Ken Griffen
    • Ken believes they had to restrict trading because the ‘good faith collateral’ (which equaled roughly $3billion) was more than shareholder equity which resulted in an inability to post the margin calls
  • If you’re short a stock, one day you will have to buy those shares back
    • As a short seller, your risk is unbounded
    • Believes all the short-sellers have given up on how to accurately price GameStop
  • Ken thinks the price is holding because GameStop bought back shares (invested in themselves) almost two years ago and has backing from the founder of Chewy, who has a great e-commerce track record
    • “[Gamestop] has seized, in the best-case scenario, on this exogenous event to make a better future for themselves” – Marc Andreessen
    • “They raised a tremendous amount of capital to create a war chest that gives them the flexibility to pursue a variety of different business strategies” – Ken Griffen
  • Retail investors are intrinsically optimists, they are willing to rally behind companies and CEOs that are building the future of America

ConstitionDAO

  • Ken Griffen outbid the ConstitutionDAO for the auction purchase of the U.S. Constitution
    • Owning a part of U.S. history was incredibly valuable to Ken
    • Ken was blown away by the ConstitutionDAO community and their ability to raise funds so quickly
  • He will be lending it to Crystal Bridges museum
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Notes By Drew Waterstreet

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