Exclusive: Robinhood explores Reddit-fueled order frenzy – raising more debt to meet sources

(Reuters) – America’s online broker Robinhood, which emerged as a gateway for amateur traders to challenge Wall Street hedge funds, has negotiated a $ 1 billion increase in debt from banks, in a bid to reduce its share of very few shares. So that people are familiar with the matter.

The capital raised will be separate from the $ 3.4 billion financing that Robinhood announced to its investors from Monday 29 January. This reflects financial pressures in stocks such as last week’s Reddit-Fueled Mania, which are placed in the GameStop Corp company. , This prompts some trades to be banned.

Robinhood needs money for backstop trades that give space to its customers, as its clearinghouse calls for more collateral due to increased volatility. Robinhood CEO Vlad Tenev said on Sunday that the trading app decided to curb some transactions because the clearinghouse asked for $ 3 billion in collateral.

Sources reported that Robinhood has begun negotiations with banks, after ending its revolving debt facility during the frenzied business last week, about expanding its lines of credit or making a new arrangement. It is unclear how much debt Robinhood will be able to secure.

Sources requested anonymity as the matter is confidential. Robinhood declined to comment.

Robinhood, which has become popular with young investors for its easy-to-use interface, is at the center of a frenzy, which closed last week after calls by Reddit thread WalcatBats traded some stocks that There were huge amounts for hedge funds.

Online brokerages faced criticism from some of their users for banning transactions. Its havoc has raised doubts over whether plans to launch an initial public offering will be on track by April.

The Menlo Park, California-based company was founded in 2013 by Baiju Bhatt and Tenev, aimed at democratizing finance. Its platform allows users to create unlimited commission-free trades in stocks, exchange-traded funds, options and cryptocurrencies.

Robinhood said on Monday that its latest equity financing was led by Ribbit Capital, with participation from existing investors including ICONIQ Capital, Andreessen Horowitz, Sekoya, Index Ventures and NEA.