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Topline
Popular trading platform Robinhood has raised $1 billion in emergency funds in order to cope with the extraordinarily high number of trades this week, the New York Times reported, as a Reddit-informed army of retail investors pour into heavily shorted stocks like GameStop, Blockbuster, AMC and BlackBerry.
Robinhood trading platform suspended some trades Thursday amid high volume trading from … [+]
Key Facts
The rapid cash infusion was needed for the company to avoid putting further restrictions on trading in place, two sources told the New York Times.
The brokerage raised $1 billion from existing investors, who the Times report will receive “additional equity in the company”, as well as several hundred million from bank credit lines.
“This is a strong sign of confidence from investors that will help us continue to further serve our customers,” a Robinhood spokesman told the Times.
It comes as the brokerage firm temporarily suspended purchases for some stocks Thursday in order to meet its “financial requirements, including SEC net capital obligations and clearinghouse deposits,” sparking outrage among users and rare bipartisan condemnation from U.S. lawmakers.
CEO Vlad Tenev defended the suspension, calling it the “correct” thing to do in order “to protect the firm and protect our customers” and denying rumors that it was because the company did not have enough cash on hand (he said it was a preemptive measure).
“Limited” trading of meme stocks — including GameStop, AMC Entertainment, BlackBerry and Bed Bath & Beyond — will resume Friday, Robinhood said.
Forbes has contacted Robinhood for comment.
Key Background
Robinhood is at the center of a movement designed to challenge Wall Street’s financial hegemony. Armies of retail investors, many informed by forums like Reddit’s r/WallStreetBets, have helped drive up the stock of struggling companies like GameStop, AMC, BlackBerry and even Blockbuster, spurring massive losses for the hedge funds who had shorted the stocks. The platform’s decision to suspend purchases of some meme stocks sparked almost universal outrage, with angry consumers tanking the app’s rating on online stores with a flurry of one star reviews and politicians vowing to investigate the decision.
Tangent
Online traders have also piled into the one-time-joke cryptocurrency Dogecoin, which was inspired by a viral image of a Shiba Inu dog. Reddit forums have said “It’s Doge Time” in a bid to make it the crypto GameStop. Its value has soared over 500% in a 24 hour period.
Further Reading
‘It’s Doge Time’: Dogecoin Surges As Reddit Traders Push To Make It The Crypto GameStop (Forbes)
Robinhood CEO: We Made The ‘Correct’ Decision In Restricting GameStop Trades (Forbes)
Robinhood Will Restart ‘Limited’ Trading In Meme Stocks GameStop, AMC As Reddit Rally Unravels (Forbes)
Robinhood’s Trading Freeze Unites Political Foes From Cruz To Warren — And They’re All Angry (Forbes)
Robinhood, in Need of Cash, Raises $1 Billion From Its Investors (NYT)
Robinhood Raises $1 Billion in Dash for Cash After Trader Revolt (Bloomberg)
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