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FollowingAMC CEO strongly condemns Robinhood's launch of tokenized stocks: Alleged violations of securities laws
On September 3, AMC Entertainment Holdings (NYSE: AMC) CEO Adam Aron severely criticized Robinhood Markets (Nasdaq: HOOD) for providing a tokenized version of the company's stock. Robinhood is an electronic brokerage platform that is popular among young traders for its offering stock, cryptocurrency and tokenized stock trading services.
What are tokenized stocks?
Tokenized stocks are digital tokens created on the blockchain to track the stock price of listed companies. While the token provides indirect exposure to the company's stock, it does not provide any traditional shareholder rights. Tokenized stocks are just synthetic versions of stocks that exist on blockchain and have no official relationship with companies publicly listed on stock exchanges.
Aaron threatens legal action
In a long post, Aaron pointedly criticized Robinhood for providing tokenized versions of AMC shares without registering under U.S. securities laws. "I found this practice shameful, shocking, disgusting, abominable, unforgivable, despicable. How can this be legal?" AMC's CEO hinted that legal action would be taken,"We will immediately have our external securities advisers investigate this."
Faced with Aaron's fierce remarks, Robinhood CEO Vlad Tenev responded with only three words: "What concerns do you have?"（What’s the concern?）
Aaron replied that his "concerns are almost existential." He noted that AMC companies spend millions of dollars each year to comply with U.S. securities laws designed to protect investors. However, as an American company, Robinhood has set up an operating organization called Robinhood Assets (Jersey) Limited in the "remote offshore island of Jersey" to promote a "securities" disguised as AMC and failed to comply with U.S. securities laws. Aaron expressed dissatisfaction.
According to Robinhood's own disclosure, its stock tokens are not registered in the United States and cannot be provided or delivered to U.S. persons. "You are building some kind of fictional synthetic stock market that decouples token ownership from the company's ability to control its own financing efforts," Aaron further complained.
AMC CEO added that the "quasi-fake" token market created by Robinhood creates a sense of distrust of financial markets as a whole. He asked Robinhood to voluntarily stop trading AMC stock tokens, otherwise the company's securities advisers would step in and "force you to stop." Aaron also questioned how the U.S. Securities and Exchange Commission supported Robinhood's "hypocritical disregard" of securities laws and said regulators would be questioned on the matter.
AMC shares rose, HOOD fell
After the close of trading on August 31, AMC Entertainment announced the formation of a film distribution company called Leawood Films to focus on small and medium-scale film releases that have difficulty obtaining distribution channels. At the time of writing, AMC shares closed at $2.74, up 7% in a single day.
Robinhood's share price fell more than 2% after Aaron threatened legal action, trading at $122.17 at the time of writing.
