Robinhood to raise $1 billion in debt for supply of heavily shorted stocks
Category: #retail  By Pankaj Singh  Date: 2021-02-02
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Robinhood to raise $1 billion in debt for supply of heavily shorted stocks

U.S. online brokerage firm, Robinhood, which gained popularity among young investors with its easy-to-use interface, is reportedly in talks with banks to raise around $1 billion in debt, in order to continue delivering orders for heavily shorted stocks.

This move comes along the heels of a mania that started last week, subsequent to calls by Reddit thread WallStreetBets that prompted Robinhood to trade some stocks that were found to be heavily shorted by hedge funds.

The online company, that drew attention for its ability to assist amateur traders challenging the Wall Street hedge funds, apparently faced criticism from some of its users for imposing restrictions on transactions. Furthermore, the current woes faced by Robinhood have placed doubts on its initial public offering that was scheduled for a launch in April.

For the record, the capital that would be raised will reflect on the financial pressure placed on the company. The amount is also separate from the $3.4 billion in financing which the firm declared to have secured from its investors since Jan 29.

Owing to this, Robinhood would now require the money in order to backstop trades placed by its customers, as its clearinghouse had demanded more collateral on account of the heightened volatility.

Robinhood’s Co-Founder and Chief Executive Officer, Vlad Tenev stated recently that the trading app has come up with a decision to place restrictions on certain transactions as the clearinghouse had asked for $3 billion in collateral.

Apparently, the company inked negotiations with banks to expand its lines of credit or arrange for new funding, after it replenished its revolving debt facility in the last week’s frenetic trading, as claimed by some sources. Also, there is no clarity yet on the amount of debt Robinhood is likely to secure.

Sources have requested anonymity as the matter is confidential, while Robinhood has declined to offer a comment.

Source Credits: https://www.reuters.com/article/us-retail-investing-robinhood-debt-exclu/exclusive-robinhood-explores-raising-more-debt-to-fulfill-reddit-fueled-order-frenzy-sources-idUSKBN2A13HG

 



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Pankaj Singh

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Pankaj Singh

Pankaj Singh Develops content for Market Size Forecasters, Algosonline, and a couple of other platforms. A Post Graduate in Management by qualification, he worked as an underwriter in the UK insurance domain before deciding to switch his field of profession. With exp...

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