Robinhood raises $1bn from investors amid GameStop frenzy
Trading platform Robinhood is raising an infusion of more than $1bn from its investors, having been strained by high volumes of trading this week.
On Thursday, the company was forced to stop customers from buying stocks that were heavily traded, such as struggling videogame retailer GameStop.
According to a New York Times report, the company contacted its investors, who came together last night to offer the emergency funding.
Online army
Robinhood, one of the largest online brokerages, has battled with a high volume of trading this week as individual investors have piled into stocks like GameStop.
The trading surge has put a strain on Robinhood, who must pay customers who are owed money from trades while posting additional cash to its clearing facility to protect its partners from losses.
GameStop’s shares soared more than 700 per cent in a fortnight after a tug of war between Reddit investors and hedge funds.
Some of the online army of investors, on a mission to challenge Wall Street’s dominance, have reaped huge profits.
One major hedge fund had to be bailed out after facing severe losses.
Stock markets shaken
Robinhood’s emergency fund-raising is the latest sign of how trading in the stock market has been toppled this week.
To continue operating, Robinhood drew on a line of credit from six banks amounting to between $500m and $600m to meet higher lending requirements.
Investors who provide new financing will receive additional equity in the company at a discounted valuation tied to Robinhood shares.
The company plans to hold an initial public offering later this year, the report said.