Online brokerage Robinhood, which has been in the eye of the storm during GameStop frenzy in the past week, has raised over $1 billion from existing investors and credit lines from banks to support its financial position after a volatile four days.
The Financial Times reported that the broker has drawn several hundred million dollars through credit facility with banks led by JPMorgan and including Goldman Sachs, Morgan Stanley, Barclays and Wells Fargo.
The move follows Robinhood, Interactive Brokers and other retail broker’s decision to block access to viral stocks such as GameStop, AMC and Blackberry on Thursday. The restriction caused a severe outrage among users.
We made a tough decision today to temporarily limit buying for certain securities. As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearing house deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.
Robinhood Chief Executive Vlad Tenev commented:
Vlad Tenev Source: LinkedIn
We understand our customers are upset, we’re doing what we can to re-enable buying in these names. We want to be clear in the communications, and I own that we should have been out there a little bit sooner.
One user tweeted:
Robinhood? Nah y’all ROBBING the HOOD.
Another user commented:
Crazy how you guys would rather watch your company burn to the ground than live up to your promise to provide users with free trade.
Two Robinhood customers sued the brokerage seeking damages because of the trading freeze.
The decision to curb trading prompted a fierce reaction from users, resulting in a class-action lawsuit for market manipulation against Robinhood and Senate banking committee looking to hold a hearing into the volatility. A multitude of conspiracy theories spread online.
Vlad Tenev said on Twitter that the company’s “mission to increase access to investing” remains.
He also said:
We cannot control, however, the lightning-fast spread of information and misinformation that takes place on social media, and for that I am incredibly sorry to our customers and staff for this.
Independent writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.