Robinhood Raises Another $2.4 Billion As App Volume Surges, Liquidity Tested

Ribbit Capital, a key investor, said it is "confident that Robinhood will emerge stronger through this phase of growth and unprecedented demand" after raising $3.4 billion in two separate funding rounds.
Author:
Publish date:

Robinhood Markets Inc. raised another $2.4 billion from its existing investors Monday as it grapples with deeper capital requirements amid a record surge in trading on its online platform.

The additional boost, first reported by the Wall Street Journal, takes its three-day capital-raising effort to $3.4 billion. The extra cash will go some way in allows Robinhood to meet margin requirements at the Depository Trust & Clearing Corporation (DTCC) clearing house while also expanding and fine-tuning its platform to cater to its now 2.7 million active app users. 

In fact, 600,000 people alone downloaded Robinhood's trading app on Friday, according to JMP Securities, as volumes in heavily traded stocks such as GameStop Corp.  (GME) - Get Report, AMC Entertainment  (AMC) - Get Report and Koss Corp.  (KOSS) - Get Report dominated Wall Street headlines.

This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we’ve seen this year.

We’re witnessing a movement of everyday people taking control of their own financial futures, many investing for the first time through Robinhood. With this funding, we’ll build and enhance our products that give more people access to the financial system.

Sequoia Capital, NEA and Ribbit Capital, firms that participated in Robinhood's last major funding round in September, were part of the capital build on Monday, according to Robinhood.

Robinhood co-founder Vlad Tenev told the online audio meeting group Clubhouse over the weekend that the National Securities Clearing Corp., a DTCC subsidiary, asked for a deposit of $3 billion late Thursday -- a figure it ultimately reduced to $1.4 billion -- to support the surge in trading volume. 

In response, Robinhood placed limits on certain stocks in an attempt to mitigate the unprecedented activity, a move users decried on social media as having come directly from some of the hedge funds reportedly suffering billions in losses from short positions on stocks such as GameStop and AMC, as well as its chief market-maker, Citadel Securities.

Several U.S. based hedge funds with short positions on those and other stocks were left nursing nearly $20 billion in loses over the month of January, according to data from S3 Partners, with broader liquidity concerns boosting defensive assets such as the U.S. dollar in response.

“This was a clearinghouse decision and it was just based on the capital requirements,” Tenev told the Clubhouse panel, which included Tesla Inc. TSLA founder and CEO Elon Musk. “From our perspective, Citadel and other market makers weren’t involved in that.”