SUMMARY
This is AI generated summarization, which may have errors. For context, always refer to the full article.
Robinhood has tapped $2.4 billion in funding on top of the $1 billion it raised last week after the online brokerage’s finances were strained due to a retail trading frenzy in heavily shorted shares of companies such as GameStop Corporation.
The latest round of fund injection means that Robinhood has raised more capital in a week than at any point since its inception in 2013, giving it enough financial muscle to meet any funding needs stemming from the trading boom.
The funding round was led by Ribbit Capital and included existing investors ICONIQ, Andreessen Horowitz, Sequoia Capital, Index Ventures, and New Enterprise Associates.
The fund raising comes at a time when Robinhood, which has become hugely popular with young investors for its easy-to use interface, is planning a high-profile initial public offering, although it is unclear whether it will push ahead with the plan due to recent developments.
The online brokerage was at the heart of a mania that gripped retail investors last week following calls by Reddit thread WallStreetBets to trade certain stocks that were being heavily shorted by hedge funds.
The trading frenzy in those shorted stocks raised deposit limits at its clearinghouse, with Robinhood’s deposit requirements tied to equities rising tenfold.
Robinhood chief executive officer Vlad Tenev said on Sunday, January 31, that the trading app was forced to place curbs on some transactions because the clearinghouse had asked for $3 billion in collateral.
Those increased deposit limits forced Robinhood to seek emergency funding and also prompted the brokerage to curb the purchase of a handful of hot stocks including GameStop and AMC Entertainment, which drew the ire of customers, celebrities, and politicians.
Clearinghouses ensure the completion of a stock trade even if one side of the deal goes bust.
Robinhood said that it would used the funds to invest in “record customer growth.”
“This round of funding will help us scale to meet the incredible growth we’ve seen and demand for our platform,” chief financial officer Jason Warnick said. – Rappler.com
Add a comment
How does this make you feel?
There are no comments yet. Add your comment to start the conversation.