(Reuters) – Robinhood, a US online broker that has emerged as a gateway for amateur traders challenging Wall Street hedge funds, has held talks with banks about raising the $ 1 billion debt so it can continue to fulfill orders. for strongly shortened actions, according to people familiar with the problem.
The raised capital will be separated from the $ 3.4 billion funding that Robinhood announced Monday it has secured from its Jan. 29 investors. This reflects the financial pressure that Reddit’s frenzy fueled last week in actions such as GameStop Corp, causing it to restrict some transactions.
Robinhood needs money to support the transactions that its clients place, because the clearing house has requested more guarantees due to the increased volatility. Robinhood CEO Vlad Tenev said on Sunday that the trading app had decided to limit certain transactions because the clearing house had asked for $ 3 billion in collateral.
Robinhood has begun negotiations with banks on expanding its lines of credit or arranging a new one after depleting its revolving debt facility during last week’s frantic transactions, one source said. It is unclear how much debt Robinhood will be able to provide.
Sources requested 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 center of a rage that began last week following calls from Reddit WallStreetBets to trade certain stocks that were heavily shortened by hedge funds.
Online brokerage has faced criticism from some of its users for restricting transactions. His troubles have raised doubts about whether his plans to launch an initial public offering by April will remain on track.
The company in Menlo Park, California, was founded in 2013 by Baiju Bhatt and Tenev, with the aim of democratizing finance. Its platform allows users to make unlimited transactions without commissions in shares, exchange traded funds, options and cryptocurrencies.
Robinhood said Monday that the latest funding for its shares was led by Ribbit Capital, with the participation of existing investors, including ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures and NEA.
Reporting by Sumeet Chatterjee in Hong Kong, Anirban Sen in Bengaluru and David French in New York; Edited by Lisa Shumaker