Robinhood raised $1 billion in emergency funds from investors this week as the platform struggles with a surge in trading, NYT report says

Robinhood raised $1 billion in emergency funds from investors this week as the platform struggles with a surge in trading, NYT report says thumbnail
  • Robinhood raised $1 billion from existing investors this week.
  • The trading platform is struggling with a surge in trading of some stocks, including GameStop.
  • Earlier Thursday, the firm also borrowed “several hundred million dollars” from banks.
  • Visit Business Insider’s homepage for more stories.

Robinhood raised $1 billion from its existing investors this week, the startup confirmed to to several news outlets on Friday. 

The firm was struggling to handle a surge in trading on the platform involving a number of stocks that have been the target of short squeezes throughout the week, driven largely by a group of retail trader on the reddit forum WallStreetBets  that helped drive up the share prices of GameStop and AMC Theaters among others.

Robinhood CEO Vlad Tenev said Thursday that the company did not have liquidity issues, after Bloomberg reported that the firm had borrowed “at least several hundred million dollars” from banks amid the trading chaos.

The Wall Street Journal reported on Friday that the frenetic trading activity, spurred by social media, caused an “unprecedented increase in Robinhood’s deposit requirements.”

Robinhood and other brokerages must keep accounts with clearing firms, and the minimum deposit needed increases when risk increases, hence the requirements for a capital infusion. 

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital’s short positions

The trading platform also temporarily stopped purchases of certain stocks, sparking outrage from lawmakers and business leaders.

In an email sent to Robinhood users on Thursday, the company said limited purchases of those stocks would be allowed on Friday, but that it would continue to “monitor the situation and may make adjustments as needed.” 

“To be clear, the decision was not made on the direction of any market maker we route to or other market participants,” the statement continued. 

Robinhood was still in need of more cash to avoid implementing further trading restrictions, two sources told The Times.

The privately-held company’s investors include venture capital firms Sequoia Capital and Rabbit Capital, both of which provided additional funding Thursday, The Times reported.

“This is a strong sign of confidence from investors that will help us continue to further serve our customers,” a spokesperson for Robinhood told The Times.

Earlier on Friday, Insider reported that r/WallStreetBets, the subreddit where much of the Robinhood trading was organized, swelled by over 1.5 million members to reach nearly 6 million total users. 

On Thursday a dozen House Republicans sent a letter to the head of the Securities and Exchange Commission calling on it to investigate possible collusion between Robinhood and any hedge funds. 

And House Democrats, as Insider reported, will hold at least 2 hearings on the matter as well.

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