(Reuters) – Robinhood, the US online agent that has emerged as a gateway for amateur traders challenging Wall Street hedge funds, has held talks with banks about rising debt $ 1 billion to be able to continue fulfilling very short stock orders. people familiar with the matter.
The capital raised would be separate from the $ 3.4 billion funding Robinhood announced Monday that it had assured its investors since Jan. 29. It reflects the financial pressure that the Reddit-fueled frenzy last week on stocks like GameStop Corp imposed on the company. , which prompts you to restrict some operations.
Robinhood needs the money to support the trades its customers run, because its trading center has asked for more collateral due to increased volatility. Robinhood CEO Vlad Tenev said Sunday that the bargaining application decided to curb some transactions because the clearing center had asked for $ 3 billion in collateral.
Robinhood began negotiations with banks on expanding its lines of credit or arranging a new one after it ran out of revolving debt facility during last week’s frantic negotiation, one source said. It is unclear how much debt Robinhood will be able to insure.
Sources asked for anonymity because 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 heart of a craze that kicked off last week following calls from the Reddit thread WallStreetBets to trade certain stocks which were being severely shorted by hedge funds.
The online brokerage received criticism from some of its users for imposing restrictions on transactions. His problems have raised doubts about whether his plans to launch a first public offering in April will remain on track.
The company, based in Menlo Park, California, was founded in 2013 by Baiju Bhatt and Tenev with the goal of democratizing finances. Its platform allows users to make unlimited transactions without commissions on stocks, exchange traded funds, options and cryptocurrencies.
Robinhood said Monday that its latest equity financing was led by Ribbit Capital, with the participation of existing investors such as ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures and NEA.
Reports from Sumeet Chatterjee in Hong Kong, Anirban Sen in Bengaluru and David French in New York; Edited by Lisa Shumaker