♪♪ welcome, everybody, and hello, i am brian sullivan jim and "mad money" have the night off. we have a big and important hour special coverage for you right now. the reddit rebellion taking a bite out of the overall market as well as stocks selling off in a big way. the markets ending their worst week since october with the dow falling 620 points, the first 2% drop on a friday since back in june the tumble taking place amid

wild swings in the battle ground stocks like game stop, amc and more look at the moves up 58% 53 and 52% but this story is no longer just about the internet versus a few hedge funds. it is larger than that now robinhood, limiting trading on many big name stocks you know. names like gm, starbucks and others the question is why? it has a lot of people growing more concerned about robinhood and we'll discuss whether this turns into a story that's far bigger than just a few traders and trades with this, growing calls of investigation and maybe more regulation one former scc attorney joining us with what should and can be done and later on, they have been called by many the market's public enemy number one. you'll hear from a short seller and how this week may have completely changed the game for how he operates going forward.

welcome, everybody thank you for joining us on this friday night we'll begin with a bombshell report dropping in the after hours out of robinhood the broker limiting trading on more than 50 stocks. not just limits on the names in the news, gamestop, amc and others you know. falling on larger companies, starbucks, general motors, amd let's get to kate rooney welcome, what do we know about the surprise move and why it may have happened? >> hi, brian, robinhood is adding new limits on what clients can buy today. the list includes 50 stocks. these are not heavily shorted names we've talked about all week like game stop for example. take a look, starbucks is on that list. advance micro devices, amd, nova vax, general motors and beyond meat are restribcted and clients can buy a maximum of one share

others on the list you can buy as many as five shares and different limits with options contracts. if you look at gamestop for example, if you already own that stock, robinhood will not let you buy if you've hit the limit, which in this case is one share. this of course, comes a day after robinhood told clients for certain stocks like gamestop and amc, they were only allowed to sell shares, not buy new ones. other broke rage firms do the same thing i spoke to robinhood and asked why a name like starbucks might make this list they say it's on a case by case basis. at this point and based on market volatility, they expect updates to the list. they say that it's a fluid situation. but one big reason for the restrictions this week, analysts i'm talking to point to robinhoodest self-clearing and custody. they have took that whole system into -- they took this back end system in house just about two

years ago to cut out the middleman. the ceo at the time lickkened it to apple he said it would help them expand quickly but raises the bar how much money robinhood needs to have in house to meet the requirements back to you. >> kate rooney on this news. let bring in another voice from the trading, a man that knows about order flow and markets than anybody out there welcome. i want to be careful with this story and you understand why we're talking about one share available to purchase on robinhood, which is also a broker and has capital requirements when you see a big platform like a robinhood, make this rather extreme move, what might it possibly tell us about what's going on behind the scenes >> well, hey, brian, great talking to you it been awhile, right. i think it clearly, obviously, everybody knows there is issues. they have problems what kate pointed out about self-clearing is interesting

you don't find many retailers that are self-clearing or adds another level of risk or capital requirements it doesn't mean they get out of this but settles books and the bigger issue for them is when it comes to public relations. this is not a good look. there are irate customers i've seen on twitter complaining but what they're trying to do is save their firms it seems like they're trying to make sure they're in regulatory compliance and have enough capital. >> again, i want to be careful on this but from a p.r. perspective, i'm not going to ask you to dive into financials because we don't know them except they did raise capital last night they went on the air and said basically they didn't need to and did but doing it in a proactive way. do you think robinhood as a platform is at risk? >> i don't know. like you said, i don't know what is inside there. i do know they have a p.r. problem and i also know this is

not new. okay has going on at robinhood, they got a $65 million fine for the way they're routing orders and we have taken exception with that many times over the years about the entire payment for order flow system. that in itself is the crux of the problem of what is going on over the last week. >> yes, and without getting too much in the weeds, joe, this is a big issue and it's -- we're realizing now that robinhood that says okay we're for the little guy and will be free. you have to ask yourself how is it free? it's not free. they're being paid when we place orders on robinhood, they are being played by sidell securities or others what we learned about robinhood is they may be for the little guy or say they are but they are not the little guy there are billions of dollars on both sides of this is there not >> yes, and by the way, they're obviously not the only retail firm accepting payment for order

flow from the market makers for those orders, but what is interesting about robinhood, as far as i can tell based on the filings, they're not a member of the stock orders to marke makers market makers are offering price improvement and also going to pay for that flow but we think the problem with payment -- again, this is not just robinhood, it distorts the order routing process. it takes the retail order that should be interacting with the pool of other orders in the market, institutional, pension funds and so on and intercepts them at the market maker level they never see the light of day or go to the stock exchange. they take them and basically model other behaviors, which is the reason they pay for it they model the behavior of the market, not necessarily just the trader but that distorts pricing. the true price discovery process is when you get the orders interacting in a diverse environment and work with each other. payment for order flow is a

price process, robinhood and other retail firms figure a way to say hey, we'll take that money and offer zero commissions. it's free. they made hundreds of millions of dollars last year in payment for order flow and that's their business model if you don't understand that, you have to read the filings whether that affects your trading, they offer price improvement. they will tell you that. at what cost how far is this spread is going on are other questions we don't want to get into the deep weeds right now. >> yeah, well, i would say being able to maybe buy one share would be an impact on many of their customers to your point, many of whom of course were irate. the two founders were or maybe still are considered billionaires a lot of money at stake. joe, always appreciate your point of view. thank you very much. >> thanks, brian. overall the market on edge today. the dow falling 620 points to close out the worst week since october. the question is this, how much

is what's going on with gamestop and reddit and robinhood going to impact the overall market, if at all let's bring in jim bianco. you're a market guy. what a lot of people say is we can't just blame robinhood and reddit the federal reserve interest rate policy, money supply, zero percent rates, that this was creating, brewing a perfect storm along with idiotcy, this is the perfect storm for something like this to occur. >> i agree this isn't just that one thing happened the easy policy by the federal reserve and bailouts from the spring helped to set an environment where people thought risk taking, the risk was reduced. i could take more risk that's what we've seen happen. we've seen more and more risk coming along the line. if you want to throw in the

positive with the story, zero commission and fractional shares, the information on the internet makes it easier for retailers to invest. throw in a couple wins remember when buffet sold the airlines and the airlines went up after that or ran into tesla and ran it up to $700 and it made it into the s&p 500 so now all of a sudden, they have the wind at their back then you come into a situation where the sizing of the short positions in some of these stocks especially game stock, this was just all wrong. it was way too big they left themselves vulnerable to a big player coming in and squeezing them and that big player is the collective of a lot of retail investors that started last week. >> yeah, the wisdom of crowds. to their credit, they figured it out. they said this company in this situation 130% short on float, where is the scc regulation sho that is supposed to prevent what they called naked short selling, not sure if it appeared here but looks like it, jim

do you think this morphs into anything bigger? is the question, again, i don't want to speck ulate, of course we have to go on what we know. robinhood limited order flow on names that are not involved in this starbucks, amd, general motors, do you have any idea why they may do that? >> i think the guy before me had the best solution. let's right this bigger. we've seen this movie before the market -- i want to be careful of my words. the market is worried about a contagion. we don't have one now. this story is not over if this continues -- if we see the short stocks continue to rally and the losses build, will people miss margin calls and will brokers be responsible for the margin calls and will we then get a contagion somewhere down the line? nobody knows and that's what is the fear here look, the old joke, the window

washer that falls off the tenth floor scaffolding, so far, so good we don't know what the pavement is is it a big bail of cotton truck like tom cruise or cement at the bottom this story is still unfolding as we go forward. >> well, it goes to market confidence, as well. here you got some traders, maybe new and been around a long time just because they're online doesn't mean they're new the internet has been around for awhile some of them made a lot of money. they were out performing the quote smart money, in some cases taking the smart money down but the market is bigger than that, right? the market is pension funds and just mom and pop and we've been burned by a couple recessions in the last decade in wild market swings, jim. if we have a liquidity issue or bigger problems or people can't take their money out, not saying there is and i hope there won't be, it's already a shaky market confidence coming into this, is it not

>> no, it definitely is. i think that that is where the concern comes in if this was just a story about the little guy versus the big guy, pull up your popcorn and let's see who winds up winning that would be one thing. but this story could have a consequence beyond just the initial players, whether or not they win or they lose if it goes into something much bigger and we'd have to wait and see. the problem also might be given the populace around this, as well, too. i heard a great line somebody said that the regulators have to act like they're not helping the masters of the universe but they might have to help the masters of the universe. that's a little different than 2008 when they basically came in and said we have to bail them out because it was the risk of the financial system but now, they can't just say that out right. they have to walk that fine line let's hope it doesn't come to that but that's what the fear is that

if it does, the push back about trying to, you know, calm the financial system will be far, far greater than we've ever seen before. >> yeah, but to joe's point to calm it down, joe did say we have seen this kind of stuff before it was a lot of people on one or two stocks that maybe was not expected, let them take the weekend, get the house in order and see what happens on monday morning certainly but we appreciate your views. jim, thank you very much. >> thank you. on deck, growing calls for regulation some in congress demanding answers as robinhood limits more trades, we're live in d.c. with the washington angle and later, the rage against the shorts, anger growing over those who bet against stocks they've been called the market's public enemy number one and you'll hear from one when this ecl pospiarert "the reddit rebellion" returns

and in an emergency, they need a network that puts them first. that connects them to technology, to each other, and to other agencies. that's why at&t built firstnet with and for first responders the emergency response network authorized by congress. firstnet. because putting them first is our job. finally moved in. it's a great old house. good bones, wraparound porch. the pipes are... making strange noises. ♪bagpipes♪ ♪bagpipes♪ ♪bagpipes♪ even the plumbers couldn't help us. nope. at least geico makes bundling our home

and car insurance easy. which saves us a ton. for bundling made easy, go to geico.com. it's moving day. and while her friends which saves us a ton. are doing the heavy lifting,

jess is busy moving her xfinity internet and tv services. it only takes about a minute. wait, a minute? but what have you been doing for the last two hours? delegating? oh, good one. move your xfinity services without breaking a sweat. now that's simple, easy, awesome. xfinity makes moving easy. go online to transfer your services in about a minute. get started today.

all right. good evening and welcome back to this cnbc special report "the reddit report. i'm brian sullivan one upside is potential bipartisanship in washington some on the red and blue side of the aisle agree. there is increased need for regulatory scrutiny. what kind and how much ylan mui joining us with more. >> reporter: lawmakers want to know what went down this week both from the companies and investors as well as from the regulatory agencies. today senator elizabeth warren sent a letter to the sec requesting more information how it plans to deal with game stop. the recent chaos reveals distortion with benefits increwing to investors that did not clearly benefit the

company's workers, consumers or economy. it will protect retail investors when the facts demonstrate abusive or manipulative trading activity other lawmakers called specifically for investigations into robinhood and why it stopped allowing purchases of game stop yesterday but robinhood does have a significant prose esence in washington it spent $275,000 on outside lobbying forms including a lawyer form the former sec and counsel for the financial services committee, which is one of the committees holding those hearings in capital hill brian, also, maybe it's a coincidence but today robinhood did post that it's hiring an in house lobbiest and says it's looking for someone who can handle rapidly shifting priorities and ambiguity with flex bibility and patience back to you.

>> hiring. what would their goal be they're hiring a lobbyist and want to have influence here. does that signifial to you on y years of reporting and money they do fear perhaps congress here >> reporter: yeah, right now this company has a reputational ri risk and it has to invest in relationships with lawmakers and regulatory agencies in case it gets call in front of congressional committees to answer some really tough questions from lawmakers. >> ylan, thank you very much let's bring in a former sec branch chief and joins us now. all right. thanks for joining us. there is so much we don't know but based on what we do know right now, do you believe the sec will or should take action >> well, i think the sec should do something the question is should they take

a paction, it's an organization made up of people who really do some serious thinking before they take action so there is -- they can do a number of things the sec certainly will study this and look at it in detail to see what happened. they have access to all of the data so they really can see behind the scenes. a lot of stuff we just don't know the other thing they can do is based on what they find, they can determine whether any of the laws have been broken and in those cases, you know, they can bring cases now for market manip manipulation so i think there will be a lot of -- >> okay, back in 99, lisa, okay, we had the yahoo message boards. we had people pumping stocks, but what they were doing was

creating fake research reports publishing stuff that wasn't true people believed it and would buy stocks, many of the companies no longer exist in your experience, is there anything wrong or illegal about a bunch of people on the same message board of reddit saying you know what? let's go after the stocks because look what the idiots did. it's right for the picking let's go, go, go is that wrong? >> that's what i love about this situation. your usual market manipulation is a bunch of guysgetting out there and pumping up the stock and selling it and pocketing the profits. here we have true believers, we have people who have political issues who see that there are problems in our markets and they responded and put their own money on the line to make a statement, many of them and that's pretty darn impressive. so i don't see bringing cases against them they definitely have statements

out there on their channel saying, you know, we want to move this stock price up and that's evidence -- >> of course that's what anybody does is it manipulation if it's a bunch of people all saying we have the same idea you have online boards and things like other platforms and blogs on the web that basically say let's do this and how might that differ from hedge fund giegiuy goinging out for a couple bottls of red wine and sharing ideas? >> that's not okay that's collective action if the sec had a little recording going there and heard that or had testimony, that would be market manipulation the question is whether these guys publicly making statements on this message board, they're not behind closed doors. they're not secretly sending signal messages to each other. they're out there.

they're just saying this you know, whether that could possibly be some kind of a collective action, i mean, it's a collection of a bunch of actions but it's not collective action. >> it's a fast -- it may rewrite certain laws down the load appreciate your insight. thank you very much. have a great friday and great weekend. best to you. >> thank you. there is much more ahead on this special hour of "fast money" . they've been called the markets public enemy number one short sellers betting against stocks unamerican you'll hear from one next and later on, gamestop won't stop. but what's the company really about? we'll cut through the noise and trades and go inside a look at the business at what is the esstk on wall street.

this is decision tech. find a stock based on your interests or what's trending. get real-time insights in your customized view of the market. it's smarter trading technology for smarter trading decisions. fidelity.

some people say our trade-in process feels too easy. they can't believe it's 100% online

and gives them a competitive offer that won't change for 7 days. an offer that they can put toward their new car. some people can't believe our friendly advocate will come to them as soon as tomorrow. drop off their new ride and whisk their old one away. because we make trading your car unbelievably easy. all so you can say... told you so. experience the new way to trade in your car with carvana. we're excited to do business with you but before we sign i gotta ask... sure, anything. we searched you online and maybe you can explain this? i can't believe that garbage is still coming in. that is so false! frustrated with your online searchesults? call reputation defender today to join tens of thousands who've improved their online reputation. get your free reputation report card at reputationdefender.com or call 1-877-866-8555.

welcome back, gamestop and robinhood big topics johnson & johnson announces results. last night nova vax says the trial looks promising as we had another day of more than 1.5 million vaccinations across america. is there reason to be cautiously optimistic how the rollout is going or concern let's bring in dr. eric toppell. thanks for joining us. this like everything else in the society is politicized, when you just look at the numbers, how do you think things are going right now? >> thanks, great to be with you, brian. we got now four vaccines with good effectiveness we had the two mrna and now as

of the last 24 hours, nova vax looks good as does the j and j they have different peafeatures different benefits but the tool chest is expanded and doubled. >> we also had positive antibody or antigen treatment news from eli lilly that brushed with the other news out there the question is we want to be hopeful. the numbers have been okay so far, but these new variants, that i think is what is scaring the medical and science tiff if i can -- signcientific communit. what's your take >> first, going back to the point you made a very good one, brian, on the antibodies against the virus. the combination that lily had of 70% reduction of death and hospitalization, which is terrific, that hasn't been approved yet

the eua that exists for one of those antibodies so we want to see that get out there and the data we want to see as soon as possible with the variants, we have a problem there. particularly the one that is called south african but it's called b 13551 that veariant is escaping from ill mun response we knew about it in the test tube nova vax and j and j saw a significant drop off because people in south africa in the trials, 95 or 90% or more had that variant it's similar to the brazil variant. so we have an issue here because our vaccines have diminished effectiveness. they will still work but not as well so we got to gear up for that.

>> speaking of a scientist this week dr. topol, there was optimism, among one that this mrna technology, this new vaccine technology, the positive of it is this guy described it to me like legos where you can mix and match as you are able to change it up, are you optimistic that this mrna protein technology and how to tweak it might be -- not easily but more easily tweaked to go after various variants because all viruses ultimately mutate. >> absolutely. the platform of mrna is ideally suited and changing letters to go along with the mutation that have been the culprits that won't be difficult. that can happen fast that would be the constitute that booster which will help so we can adjust the key really, though, brian is what about the next major

variant. we're not containing the virus we're in a hyper evolution phase so we have to get containment. besides getting booster shots of vaccines and vaccines into many people as quickly as we can, we've got to get -- do a much better job of preventing the spread of the virus. >> that's it 1.6 million, the rollout states are figuring out, doctor we have to leave it there. is there reason for us all, friday night to feel a little cautious, optimism or no >> well, i'm a very optimistic person and i have no reason to think we won't prevail it may take longer because of this variant stuff but we'll get there. >> we will get there all pandemics come to an end appreciate the view point. thank you very much. >> thank you. on deck, ground zero of the reddit rebellion back to the gamestop story it's been a wild week. what is gamestop the company, the video game seller. what is it really about?

if you missed any of the twists and turns in this wild week in the market, don't worry. we've got you covered. this special report "the reddit rebel rebellion" is back on this day the dow fell more than 600 points hey, dad! hey, son! no dad, it's a video call. you got to move the phone in front of you like..like it's a mirror, dad. you know? alright, okay. how's that? is that how you hold a mirror? [ding] power e*trade gives you an award-winning mobile app with powerful, easy-to-use tools and interactive charts to give you an edge, 24/7 support when you need it the most and $0 commissions for online u.s. listed stocks. don't get mad. get e*trade and start trading today. it's hard to hope, hard to cope with crisis.

so we get to work. we mend, fighting for every person in every neighborhood; we, the coming of the common good. so dare to care, to be hope-sided. we're never divided, when we live to give, we always live united. re-entering data that employees could enter themselves?

that's why i get up in the morning! i have a secret method for remembering all my hr passwords. my boss doesn't remember approving my time off. let's just... find that email. the old way of doing business slows everyone down. with paycom, employees enter and manage their own hr data in one easy-to-use software. visit paycom.com for a free demo.

all right. welcome back and good friday evening. just a reminder, jim and "mad money" are off tonight but we have you covered on a day where the dow fell more than 600 points, it was it's first 2% drop on a friday since all the way back in june of last year. the nasdaq also down 2%. of course, this week, the game all changed. and the name of the game became game

gamestop the stock red hot. there is a return of 4% this week but why don't we peel it back, the wild moves and find out th hot stock bob is here with that, bob, good evening. >> good to see you could the trading in game stop be any wilder? today was a relatively tame day believe it or not despite the expiration of the weekly options here the stock was up 67% today but it was up 1600% for the month, not a typo the fundamentals of course don't have anything to do how the stock is trading now but worth noting game stop has been seeing revenues declining for a long time earnings have been declining and the company is expected to have a significant loss in 2020, all this for a $325 stock why are these trends so bad? because consumers are shifting away from the brick and mortar

stores they cater to to the digital downloads. apple and alphabet are transforming the industry with the launch of netflix style subscriptions. could game stop do something to improve the fundamentals of course they could there is talk of a digital model and closing the stores and keeping the business that's profitable and diversifying it to new services talk of game distribution platforms, even sponsoring tournaments for example. all this is well and good but all has an air of unreality to it as for next week, it may not be so easy to make money this time implied valueolatility is imply daily moves of 40% a day what does that mean? so the option prices are really high now and they're hard to price and it comes with a great risk to both buyers and sellers because of this insane volatility and it tells you they don't expect the volatility to drop off at least in the next week.

brian, i'm looking at $500 calls in game stop they're charging $80 for it for one week $80 for a $500 call right now. they're repricing the options right across the board particularly in game stop -- >> minute by minute basis. by the way, gamestop 660 million in operating income in 2016, a loss of 200 million. that's not -- the fundamental business isn't doing well and you're exactly right as usual, bob. somebody sent me a chart of the pub option betting a stock will go down, volume versus call. the put option -- i'm doing this really sophisticated thing with my arms. the put option volume, bob was through the moon the call option much lower we could see huge volatility in game stop and maybe thus the overall markets next week, right? because if people got to cover, they might have to sell what

they can. >> yes and of course, high put call ratios generally considered an interesting indicator for the market it's contrary overall. that didn't work quite well today. the key point here, brian, they're repricing options and going to be a lot more expensive now and not just with game stop. they're not going to get blown out on this on a regular basis, the market makers for anything that's, i think, one thing you want to talk about what will change, that will change option prices are going to be higher at least for the foreseeable future in general. >> very quickly, bob, you've been doing this a long time. i'm not picking on robinhood necessarily. what if we saw swab limchwabb lt trades including gm and starbucks. >> i think it goes to some particular problems, robinhood may be having. remember, they clear their

own -- they self-clear essentially. they go through the dttc ultimately but self-clear and caused problems. they had to put up a significant amount of money this week. so they may have very particular problems associated with their business model. >> we'll see a lot of stuff just a couple of names but looking at gamestop, bob, thank you, buddy, have a good friday and a good weekend. >> have a good weekend. >> all right see what i did dothere. we're talking to public enemy number one the notorious short seller now one of them is questioning the nature of his own game what could this future hold for this small but important corner of the marketplace and how will the game stop game stop? we're going to break it down on this specialdion eti of f""fast money" continues. fast money" continues.

nice game. your crosscourt shots are killing me. give any thought to that proposal i sent you? v 7 x 9 7 4? semi colon 8 d 3 f lowercase p uppercase t, you know? okay. 7 4 8 9 2 % . $ ) h b. oh, hey roger. 4 9 6 8. listen, k 9 3 b 4 8 6 2. h n 7 e. i can do h n 7 e. got to keep the shareholders happy. echoworx, the leader in email encryption solutions. t-mobile knows the new year brings big news! that's why we're bringing out our best deal on the new iphone 12 with 5g. right now, get the iphone 12 on us on every single plan. switch now and save 20% on your bill versus the other guys. and that's not an introductory rate, that's the best value in wireless. that's right. the iphone 12 on us. on america's 5g leader in coverage. and save 20% per month.

share big moments and big savings at t-mobile. ♪♪ hey you, yeah you. i opened a sofi money account and it was the first time that i realized i could be earning interest back on my money. i just discovered sofi, and i'm an investor with a diversified portfolio. who am i?! i refinanced my student loans with sofi because of their low interest rates. thanks sofi for helping us get our money right. ♪♪

so, what should we do today? ♪♪ [sfx: beep beep beep] should we just go see a movie? yes! go rogue in the all-new, fiercely reimagined nissan rogue. new projects means new project managers. go rogue in the you need to hire. i need indeed. indeed you do. the moment you sponsor a job on indeed you get a short list of quality candidates

from our resume database. claim your seventy five dollar credit, when you post your first job at indeed.com/home. all right. welcome back to this cnbc special report, "the reddit rebe rebellion. there are short sellers. andrew left throwing in the towel covering his short position on gamestop marking maybe the end of an era for left in a tweet the firm said in 20 years of publishing, we will no longer publish short reports and focus on long side multi bagger opportunities for individual investors. so did this change the game for short sellers to operate how much they disclose

let's bring in dan david, founder of wolf pack research and joins us now big fan of your work on the china stuff with a documentary with herb greenburg in that. welcome to the program first off, are you short or were you short game stop? >> no, thank you for having me on, brian. no, i was not short gamestop i have not been short or long gamestop and apparently, as of yesterday, i can't get short or long gamestop thanks to, you know, robinhood and many retail platforms that don't allow us to anymore. >> well, by the way, everyone is calling it game stock or gameits appropriate this week. would you want to try to go short gamestop because here is the irony, if you hate the company and want to push it down, the higher it goes as long as you don't get blown out, theoretically, the more you'd like the short if you can afford

the cost of borrow. >> buying gamestop right here makes zero sense at all. yet, here i found myself yesterday looking to buy a few shares just to join in on, like, going against the establishment and saying you just don't do this anymore you can't tamp down on freedom of speech and if this is what we want to do, this is what we can do that comes from a short seller if they want to come against my next report, that's fine let it play out. but the last thing we need to do is to have congress, you know, regulate this. they never get that right. think of 2008 when they put a ban on short selling how well did that work out in retrospect it never works out they're all pandering for headlines -- >> well, you're known for your china calls, dan everyone should watch the

documentary. that's what china does, they ban short selling. stocks have a one-way trip because you can't bet against it people call short sellers unamerican there are some companies that are bad. i'm not saying gamestop is but there are companies that are fraudulent you pointed that out on so many reports of chinese companies that claim to be 600 million in revenue and two guys in a truck and there is a benefit to this, do you think, though, that getting 130% short against the float, whether it's with options or whatever it might be, should that be allowed because it happened >> look, that's not unusual. let's talk about that for a second when you think about the liquidity that hits the market and where will passive funds put their money and look at game stop for an example. you look at 70 million shares outstanding looks like a lot, right? 20% of it is insider held. you can take 30% of it is

insider held take 20 million shares off the top now. now you're at 50 million shares. 46 million shares are owned by passive funds like van guard and fidelity there is 40 million shares available for the users to bid up and bid up and bid up let's talk about how you get to 130% over sold the van guards and fidelities of the world say hey, invest with our passive fund because we're zero fees. how do they make money they land shares and make money by landing shares. when they land the share to a short seller, they still say they own it. the short seller sells it to the market to somebody else and somebody else says they own it that's a synthetic share that is two shares for one and that's always happened and now congress is saying how did this happen? it's always happened. >> and by the way, those who lend it are going to get paid because that cost to borrow is huge on game stop now.

dan david wolf pack research pleasure to have you on. thank you very much. we'll wrap up the reddit rebellion making big waves where do we go from here big down week for stocks but now we have limitations on trades. what happens next week?

they mentioned things like digital confetti they said improving customer trades without options experience is not illegal. so really outlining and pushing back some of that. i had to get to that first because we did just get that but this has been a wild week for this company they have seen some hiccups before they've faced issues with

regulators like i just mentioned, even a month ago had a suit filed from the state of massachusetts they're facing an sec lawsuit. so robinhood has seen some growing pains. this is completely new they are now facing customer backlash you've seen it all over twitter and reddit conspiracy theories that they are protecting the hedge funds, and that's -- it's a completely new issue. they're facing both sides of this, and what folks tell me is a lose/lose battle at least for a company heading towards an ipo. >> yeah, and certainly it is and, hugh, listen, i guess i'll defend robinhood in a bit because everybody just kind of wants to pile on them. they are incredibly fast-growing, and let's not forget, maybe i'm the only one old enough to remember you used to have to call up your broker j.b., i'd like to buy ibm, and it was $150 to buy six shares of ibm. now they've democratized and it's free, but it's free, hugh, because they're getting paid by some of the biggest and most

powerful hedge funds in the world. ultimately it's kind of a follow-the-money story, and that's what you do by the way. >> brian, yeah thank you. people may not realize, so they think they're the customers of robinhood. they're paying nothing, right? so they provide the order flow it's called payment for order flow to people like citadel, so some of the biggest electronic market makers in the world and citadel and virtue are the ones paying robinhood most of their revenue for the most part. there are other fees obviously if you're a gold member or whatever, but for the most, it's payment for order flow i think once people realized that, once people heard that, it is hard to get around these sort of conspiracy theories, and you've seen the memes where ken griffin should be jailed and things like that absurd things really but once you understand that relationship, it is very difficult to look at it and say, should this be the way it goes you know, should we really understand what our relationship

and what our expectations for this platform that's not going anywhere -- you know, they signed up more and more people this is mainstream news now. this is not just business news, guys so i think this is something that's going to get to a head where we have to decide some things. >> yeah. if something's free, you're the product. i mean, okay and people get mad at facebook, right? they're like mad at facebook i'm like, well, you're getting your money's worth because it's free it's zero. you're not facebook's customer facebook's customers are the advertisers, but robinhood, there's real money on the line that's the difference. >> yeah, that's right. if you're talking about facebook's business model, people always say you're the product. but you want to know how i know this is real, brian, is when i woke up this morning, i looked at the app store rankings. these are the snapshot in time of the most popular apps being downloaded all of them had to do with this whole gamestop retailer

investment boom. it was robinhood it was reddit. it was fidelity. you name it, they were at th top of the app store that's how you know this has broken out of the dark corners of the internet and into the real world >> thank you, steve, hugh, kate. appreciate it. good insight we'll see you next week. "the news with shepard smith" begins right now more doses per vial. the late-breaking push to get shots in more arms and an important new warning from dr. fauci. i'm shepard smith. this is "the news" on cnbc >> it's completely preventing the things that are most scary. >> johnson & johnson's one-shot vaccine promising results, efficacy, storage, and how it could change the landscape for mass inoculation as the threat evolves. >> the virus will continue to mutate and will mutate for its

own selective advantage.