The capital raised would be separate from the US$3.4 billion in financing that Robinhood announced on Monday it had secured from its investors since January 29. It reflects the financial pressure that last week’s Reddit-fuelled frenzy in shares such as GameStop placed on the company, prompting it to restrict some trades.
Robinhood needs the money to backstop trades that its customers place, because its clearinghouse has asked for more collateral due to heightened volatility. Robinhood CEO Vlad Tenev said on Sunday that the trading app decided to place curbs on some transactions because the clearinghouse had asked for US$3 billion in collateral.
Robinhood started negotiations with banks about expanding its lines of credit or arranging a new one after it drained its revolving debt facility during last week’s frenetic trading, one of the sources said. It is not clear how much debt Robinhood will be able to secure.
The sources requested anonymity because the matter is confidential. Robinhood declined to comment.
The online brokerage faced criticism from some of its users for placing restrictions on transactions. Its woes have raised doubt over whether it plans to launch an initial public offering by April will stay on track.
The brokerage, which has become popular with young investors for its easy-to-use interface, is at the heart of a mania that kicked off last week following calls by Reddit thread WallStreetBets to trade certain stocks that were being heavily shorted by hedge funds. (Reuters)