Robinhood website home screen
Photographer: Gabby Jones / Bloomberg
Photographer: Gabby Jones / Bloomberg
According to people with knowledge of the matter, Robinhood Markets, the trading app popular with investors doing the wildest stock swings this month, has pulled off its credit lines at banks.
One of the people said the firm had used at least hundreds of millions of dollars. According to the lenders of the company, JPMorgan Chase & Co. and Goldman Sachs Group Inc. data compiled by Bloomberg. Representatives of Robinhood and the banks declined to comment.
The behind-the-scenes rush to bolster Robinhood’s finances contributes to the signs that the recent market destruction is putting a lot of pressure on the company, which reported many retail investors to its app during the pandemic. The firm is one of the brokers that trades shares of GameStop Corp. and AMC Entertainment Holdings Inc. caused outrage among customers on Thursday. Robinhood has also told users that it may close some of their positions as it takes steps to reduce account risks.
“As a brokerage firm, we have many financial requirements, including SEC net capital liabilities and deposits,” Robinhood said. blog post Thursday. ‘Some of these requirements vary according to the volatility in the markets and can be significant in the current environment. These requirements exist to protect investors and the markets, and we take our responsibilities to comply with them seriously, including through the measures we have taken today. ”
‘Limited sale’
With its user-friendly app and commission-free trading, Robinhood has grown rapidly over the past few years and all the more so during the pandemic, which became the preferred platform for legions of people turning to stock markets to make money and pass time during lockouts. . The firm has been expected for months to hold an initial public offering this year.
But the drama surrounding the increase in prices for GameStop and AMC this month, coordinated by investors on Reddit, has put Robinhood at the center of controversy. The company said after U.S. trading on Thursday that it would be able to resume “limited purchases” in certain affected securities.
Robinhood has previously struggled on banks to resist unrest. In March, the firm people familiar with the matter at the time withdrew an entire $ 200 million facility from a trio of lenders, while the coronavirus pandemic caused a flood of transactions and the strong swing of the market, during which Robinhood’s trading platform repeatedly interrupted.
– With help by Misyrlena Egkolfopoulou
(Background updates on noise from third paragraph)