Robinhood resorts to bank lines of credit after GameStop-led frenzy
Robinhood Markets, the trading app popular with investors who have been behind some of the 'wildest' stock swings this month, has tapped some of its credit lines with banks.
Bloomberg News reported that the company accessed at least several hundred million dollars, one of the people said. The lenders include JPMorgan Chase & Co. and Goldman Sachs Group.
The moves come after a Wall Street shakeup led by GameStop, a video game retailer that saw its stock value rise 1,800 percent in just a three-week span. This frenzy led Robinhood to halt GameStop's stock trading in its app, causing the retailer's stock to plunge as much as 68 percent.
However, by the end of the session, they ended with gains of 44 percent. The rush to shore up Robinhood's finances adds to signs that recent market havoc is putting pressure on the company, which has recruited a multitude of retail investors to apply during the pandemic. After closing trading shares of GameStop and other firms, Robinhood also told users that it may close some of its positions as it takes steps to reduce account risks.
"As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits," Robinhood said in a blog post-Thursday. "Some of these requirements fluctuate based on market volatility and can be substantial in the current environment. These requirements exist to protect investors and the markets, and we take our responsibility to meet them seriously, including through the actions we have taken today."