Tuesday, February 02, 2021
Extension of new credit lines?
Robinhood is negotiating a billion dollar loan
The neo broker Robinhood needs fresh money in order to be able to adequately secure the recent flood of customer orders. The securities trading app has only raised a total of 3.4 billion dollars from investors in the past few days, but according to insiders it is still in talks with banks.
The online broker Robinhood, which hit the headlines because of the gamestop hype, is negotiating, according to insiders, over loans with a volume of one billion dollars. The company is talking to banks about expanding existing credit lines or approving new ones, said a person familiar with the operations. How much Robinhood can secure was unclear. The company declined to comment.
The trading platform popular with small investors had only raised a total of 3.4 billion dollars from its investors in the past few days. Robinhood needs the money to adequately hedge the recent flood of customer orders. Robinhood boss Vlad Tenev said on Sunday that the responsible clearing house had requested collateral of three billion dollars in view of increased fluctuations. That's why his company decided to restrict transactions, said Tenev.
Robinhood caused outrage among investors last week when the online broker blocked purchases of the shares of video game provider Gamestop, which had been skyrocketing for days, but allowed sales to continue. In addition to Gamestop, Robinhood had also restricted trading in other titles that were targeted by speculators – some of them hobby dealers on Internet platforms such as Reddit. On Monday, Gamestop shares lost more than 28 percent.
The stock market battle between established Wall Street players and retail investors has sparked a debate about the business model of hedge funds. The US Senator Elizabeth Warren of the left wing of the Democrats criticized that the events only illustrate what has been going on on Wall Street for years. There is "a group of players" who manipulate the market. Senator Bernie Sanders called Wall Street's business model "flawed" and lamented "outrageous behavior" on the part of hedge funds.
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