The mobile trading app Robinhood had to go back to the source of financial support from its supporters, as the continued trading of some of the most volatile stocks on the market forced the company to meet greater demands for cash.
While shares of GameStop (NYSE: GME) Robinhead was still forced to raise $ 2.4 billion to make the storm go away.
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Question out of comparison
Stock traders on Reddit had a testament contest with hedge funds covering GameStop and other issues, such as AMC Entertainment Holdings (NYSE: AMC). In the middle were brokerage houses like Robinhood that facilitated the buying and selling of the stock.
Because of the app’s popularity and with the trade attack that followed when the fight became one of a populist investment revolt against Wall Street insiders, Robinhood’s capital requirements increased with stock trading.
The platform had to raise $ 1 billion last week to meet the demands, although CEO Vlad Tenev said at the time that it was a precautionary measure and that Robinhood had no financial problems. It also bought some breathing room by banning all purchases of shares like GameStop and AMC. Investors could only sell.
The color tone that followed, however, forced Robinhood to return, but it devised a plan to limit the amount of stock a user could buy. The most restrictive conditions were imposed on GameStop shares, for which users could buy only one share and five option contracts.
Whether the plan works remains to be seen, because as boxing legend Mike Tyson once remarked, “Everyone has a plan until they are punched in the mouth.”