Robinhood Raises $1 Billion After Trading Halts

Following a week of significant volatility in the stock market and temporary suspensions of trading for certain highly speculative stocks, including GameStop (GME) and AMC, the consumer investment application Robinhood has secured additional funding. The company reports that it has obtained over $1 billion in new capital from its current investor group, as stated to TechCrunch.

According to reports from The New York Times, this new equity financing occurred after the company utilized its credit lines, drawing between $500 and $600 million. Robinhood did not respond to TechCrunch’s inquiry concerning these credit lines.

This amount drawn aligns with previous reports from yesterday, which indicated that Robinhood had accessed a nine-figure sum of capital to guarantee sufficient funds were available to satisfy regulatory requirements and other obligations related to its users’ trading activities.

In recent weeks, a combination of individual and institutional investors have targeted short positions in several stocks, creating a conflict between optimistic and pessimistic investment strategies. This situation resulted in dramatically increased trading volumes for volatile stocks, necessitating Robinhood to bolster its capital reserves to maintain operational functionality.

In a statement explaining its decision yesterday to limit trading in specific securities, Robinhood explained that it faces “numerous financial obligations, including SEC net capital requirements and clearinghouse deposits.” The company further noted that “these requirements can change based on market fluctuations and are currently substantial.”

The consumer fintech company temporarily paused trading in stocks like GameStop, which were at the center of the trading activity, prompting strong criticism from users who suspected improper actions. Later that day, the clearinghouse supporting other consumer trading platforms also halted trading for a comparable set of stocks.

Robinhood informed its users that it intended to resume trading, in some capacity, today in the shares it had previously restricted.

The current trading situation does not appear likely to resolve quickly. GameStop shares, the most well-known “meme stock” involved in the current market activity, are up nearly 94% in pre-market trading this morning, suggesting continued investor willingness to drive up the price and potentially challenge existing short positions.

A consequence of the present market conditions is a surge in demand for trading applications. As of today, Robinhood holds the top ranking on the U.S. iOS App Store; Webull, a competing service, is second; Reddit, a popular forum for trading discussions, particularly through r/WallStreetBets, is third; Coinbase, a widely used cryptocurrency trading platform, is fourth. Square’s Cash App, which facilitates stock purchases, is seventh, Fidelity’s iOS app is tenth, and TD Ameritrade is sixteenth. E*Trade’s app is ranked eighteenth. This demonstrates strong performance for both established and emerging fintech companies.

The future remains uncertain, including the outcome of these trades and whether the current increase in retail stock trading will continue. However, it appears likely that today will be characterized by unusual market behavior.