Robinhood raises $1 billion lifeline from investors to stay afloat | Tech News

Fintech startup and free-trading app Robinhood had a rough week, to say the least. First, the millennial-favored stock trading app came under attack after it banned Reddit amateur traders known as WallStreetBets (a Reddit board of over 2.8 million members) from trading on its platform. The following day, Robinhood caved after a growing chorus of public figures like U.S. Congresswoman Alexandria Ocasio-Cortez (AOC), Senator Elisabeth Warren, Elon Musk, and others.

Then when the company thought it has had enough, yesterday, the cash-strapped Robinhood was forced to raise $1 billion to meet regulatory requirements. According to a report from the New York Times, Robinhood drew a credit line from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation.

However, a $1 billion lifeline is not going to cut it for the company to stay afloat. According to NYTimes, Robinhood still needed more cash quickly to ensure that it didn’t have to place further limits on customer trading, citing two people briefed on the situation who insisted on remaining anonymous because the negotiations were confidential.

“As a brokerage firm, we have many financial requirements,” Robinhood said in a blog post on Thursday. “Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”

Founded in 2015 by co-founders and Co-CEOs Vlad Tenev and Baiju Bhatt, Robinhood’s powerful investment platform offers commission-free U.S. equity and options trading, as well as margin and extended hours trading through Robinhood Gold. The fastest-growing brokerage ever, Robinhood counts over three million users and billions of dollars in transaction volume.

Headquartered in Palo Alto, California, the company is backed with $176 million from DST Global, Index Ventures, NEA, and Thrive Capital, and most recently valued at $1.3 billion. Robinhood is democratizing access to America’s financial system. Robinhood’s backers the venture capital firms Sequoia Capital and Ribbit Capital.

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