Robinhood Banks $1 Billion Emergency Cash after Thursday Chaos

by Arnab Shome
  • The platform imposed 'limited buys' of GameStop and a few other volatile stocks.
Robinhood Banks $1 Billion Emergency Cash after Thursday Chaos
Robinhood

As the trading market chaos continues with the clash between rookie brokers and Wall Street, American platform Robinhood raised more than $1 billion in additional emergency cash, according to The New York Times report.

The Trading Platform opened a credit line between $500 million and $600 million with six banks and approached existing investors, which includes Sequoia Capital and Ribbit Capital, for additional cash.

The need for the emergency came as the young retail traders, who are popularly discussing their strategies on the WallStreetBets subreddit, pumped the price of stocks like Gamestop and a few others bringing the hedge funds, who shorted these stocks, down on their knees.

Robinhood, which literally brewed these rookie traders with its commission-free simplified platform, saw an extraordinary trading volume in the last few days and now has to pay customers who made money from the trades and also has to pay collateral to the central clearing hub, the Depository Trust & Clearing Corporation.

A Dramatic Week for the Trading Industry

Additionally, Thursday’s trading session was very dramatic for Robinhood as the company first restricted transactions for volatile stocks, like GameStop, AMC Entertainment, Blackberry, and Koss, to closing only positions.

However, outraged traders turned against the no-fee platform and filed a federal lawsuit accusing Robinhood’s involvement in market manipulation. This legal move, along with criticism across its userbase, forced the trading platform to roll back some of the restrictions.

"Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed," Robinhood announced. "To be clear, this was a Risk Management decision, and was not made on the direction of the market makers we route to."

Citing two anonymous sources, the report outlined that the existing investors extending a helping hand to the trading platform will receive additional equity at a discounted valuation. The California-based company is planning to go public later this year.

Though Robinhood seems to have made most of the headlines, the market chaos has affected the entire trading market. Furthermore, other platforms like Interactive Brokers and Trading212 imposed restrictions as international traders started to jump into the frenzy.

As the trading market chaos continues with the clash between rookie brokers and Wall Street, American platform Robinhood raised more than $1 billion in additional emergency cash, according to The New York Times report.

The Trading Platform opened a credit line between $500 million and $600 million with six banks and approached existing investors, which includes Sequoia Capital and Ribbit Capital, for additional cash.

The need for the emergency came as the young retail traders, who are popularly discussing their strategies on the WallStreetBets subreddit, pumped the price of stocks like Gamestop and a few others bringing the hedge funds, who shorted these stocks, down on their knees.

Robinhood, which literally brewed these rookie traders with its commission-free simplified platform, saw an extraordinary trading volume in the last few days and now has to pay customers who made money from the trades and also has to pay collateral to the central clearing hub, the Depository Trust & Clearing Corporation.

A Dramatic Week for the Trading Industry

Additionally, Thursday’s trading session was very dramatic for Robinhood as the company first restricted transactions for volatile stocks, like GameStop, AMC Entertainment, Blackberry, and Koss, to closing only positions.

However, outraged traders turned against the no-fee platform and filed a federal lawsuit accusing Robinhood’s involvement in market manipulation. This legal move, along with criticism across its userbase, forced the trading platform to roll back some of the restrictions.

"Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and may make adjustments as needed," Robinhood announced. "To be clear, this was a Risk Management decision, and was not made on the direction of the market makers we route to."

Citing two anonymous sources, the report outlined that the existing investors extending a helping hand to the trading platform will receive additional equity at a discounted valuation. The California-based company is planning to go public later this year.

Though Robinhood seems to have made most of the headlines, the market chaos has affected the entire trading market. Furthermore, other platforms like Interactive Brokers and Trading212 imposed restrictions as international traders started to jump into the frenzy.

About the Author: Arnab Shome
Arnab Shome
  • 6294 Articles
  • 79 Followers
About the Author: Arnab Shome
Arnab is an electronics engineer-turned-financial editor. He entered the industry covering the cryptocurrency market for Finance Magnates and later expanded his reach to forex as well. He is passionate about the changing regulatory landscape on financial markets and keenly follows the disruptions in the industry with new-age technologies.
  • 6294 Articles
  • 79 Followers

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