Robinhood, the US on-line dealer that has emerged as a gateway for novice merchants difficult Wall Avenue hedge funds, has held talks with banks about elevating $1 billion in debt so it may possibly proceed to meet orders for closely shorted shares, in accordance with individuals accustomed to the matter.
The capital raised can be separate from the $3.4 billion in financing that Robinhood introduced on Monday it had secured from its buyers since January 29. It displays the monetary strain that final week’s Reddit-fueled frenzy in shares reminiscent of GameStop Corp positioned on the corporate, prompting it to limit some trades.
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Robinhood wants the cash to backstop trades that its clients place as a result of its clearinghouse has requested for extra collateral on account of heightened volatility. Robinhood CEO Vlad Tenev mentioned on Sunday that the buying and selling app determined to position curbs on some transactions as a result of the clearinghouse had requested for $3 billion in collateral.
Robinhood began negotiations with banks about increasing its strains of credit score or arranging a brand new one after it drained its revolving debt facility throughout final week’s frenetic buying and selling, one of many sources mentioned. It’s not clear how a lot debt Robinhood will have the ability to safe.
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The sources requested anonymity as a result of the matter is confidential. Robinhood declined to remark.
Robinhood, which has turn out to be widespread with younger buyers for its easy-to-use interface, is on the coronary heart of a mania that kicked off final week following calls by Reddit thread WallStreetBets to commerce sure shares that had been being closely shorted by hedge funds.
The net brokerage confronted criticism from a few of its customers for putting restrictions on transactions. Its woes have raised doubt over whether or not its plans to launch an preliminary public providing by April will keep on observe.
The Menlo Park, California-based firm was based in 2013 by Baiju Bhatt and Tenev, aiming to democratize finance. Its platform permits customers to make limitless commission-free trades in shares, exchange-traded funds, choices and cryptocurrencies.
Robinhood mentioned on Monday that its newest fairness financing was led by Ribbit Capital, with participation from present buyers together with ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures and NEA.