Home screen of Robinhood website
Photographer: Gabby Jones / Bloomberg
Photographer: Gabby Jones / Bloomberg
Robinhood Markets, the trading app that is popular with investors behind this month’s most violent stock swings, has lowered some of its credit lines with banks, according to people familiar with the matter.
The company made at least several hundred million dollars, one person said. The company’s creditors include JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to data compiled by Bloomberg. Representatives of Robinhood and those banks declined to comment.
The behind-the-scenes rush to bolster Robinhood’s finances heightens signs that the recent market devastation is putting pressure on the company, which hired multitudes of retail investors for its app during the pandemic. The company is among the brokerage firms that have restricted the trading of GameStop Corp. and AMC Entertainment Holdings Inc. on Thursday, sparking outrage among customers. Robinhood also told users that he can close some of his positions as he takes steps to reduce the risk of the account.
“As a broker, we have many financial requirements, including SEC net equity obligations and clearinghouse deposits,” said Robinhood in a statement. blog post Thursday. “Some of these requirements vary based on market volatility and can be substantial in the current environment. These requirements are in place to protect investors and markets and we take our responsibility to comply with them seriously, including through the measures we take today. “
‘Limited Purchases’
With his friendly app and commission-free negotiations, Robinhood has grown rapidly in recent years and even more during the pandemic, becoming the platform of choice for legions of people who turn to the stock markets to make money and spend time during the blockades. For months, the company is expected to conduct an initial public offering this year.
But this month’s drama surrounding the rise in GameStop and AMC prices, coordinated by investors on Reddit, put Robinhood at the center of the controversy. The company said, after negotiations closed in the United States on Thursday, that it will allow “limited purchases” to resume on some affected bonds.
Robinhood relied on his credit with banks to deal with turbulence earlier. In March, the firm withdrew an entire $ 200 million facility from a trio of creditors, people familiar with the matter said at the time, when the coronavirus pandemic sparked a flurry of transactions and sharp market swings, during which Robinhood’s trading platform was disrupted repeated
– With the help of Misyrlena Egkolfopoulou
(Updates with background on third paragraph turmoil)