Cash-Strapped Robinhood Scrambles To Raise $1 Billion From The Rich
After years of carefully building its brand and reputation, Robinhood, the stock-trading app that helped invent the no-fee commission, is on the verge of collapse as it faces a mortal threat for any financial company: a bank - or in this case a brokerage run - as thousands of its core users threatened to abandon the platform after RH halted trades in shares of Gamestop, AMC and other shares that had become part of a Reddit-inspired populist revolt against the hedge fund community.
Immediately, the move sparked a wave of rumors which verged on (what some might call) conspiracy: Dependent on HFT market-makers like Citadel for most of its revenue, Robinhood was cutting off the bulls who were bidding Gamestop and a handful of other popular hedge fund shorts into the stratosphere in service to its "masters".
Robinhood wasn't the first mover: As we pointed out the other day, TDAmeritrade was the first to make the "unprecedented" move. As we suspected, it was almost immediately followed by the rest of the major day-trading brokerages.
However, as the day progressed the situation became clearer, Robinhood was in trouble.
After the market close on Thursday, Robinhood co-founder and CEO Vlad Tenev was on CNBC being grilled by Andrew Ross Sorkin about whether the firm was selling out the customers and core users who made it a success. Tenev swore that he and the firm had acted "preemptively" (in cutting off certain trades and cashed out some customers' positions), attempting to make clear that the firm didn't really need any liquidity.
As Dave Portnoy cracked jokes on twitter about the "irony" of a company called Robinhood stealing from the poor to give more to the rich, Tenev was telling Andrew Ross Sorkin that "we absolutely did not do this at the direction of any market maker...the reason we did it was because Robinhood is a brokerage firm, we have lots of financial requirements including SEC met-capital requirements."
Robinhood Is Said to Draw on Credit Lines From Banks Amid Tumult
Robinhood taking from the rich... to stay in business