Scott Martin of Kingsview Wealth Management and Future File legacy planning system creator Carol Roth provide their insights into how Wall Street and Robinhood have reacted to the Gamestop short squeeze.
The trading frenzy that has surrounded Robinhood is taking a financial toll on the online trading app.
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The company has had to ask existing investors for a cash infusion of more than $1 billion, according to the New York Times.
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Robinhood has been dealing with an extraordinarily high volume of trading this week as investors bought shares of stocks like GameStop.
Robinhood has to pay customers who are owed money from trades, plus money to a clearing facility to guard trading partners from potential losses.
ROBINHOOD TELLS CUSTOMERS IT WILL ALLOW ‘LIMITED BUYS’ AMID GAMESTOP, AMC TRADING FRENZY
Robinhood stopped customers from buying a number of shares on Thursday due to large amounts of trading in those stocks, according to the company’s blog post..
According to the Times, Robinhood drew on a line of credit from six banks amounting to between $500 million and $600 million.
PROTESTERS GATHER AT ROBINHOOD HQ, SEC, NYSE
The company also contacted several of its investors, including the venture capital firms Sequoia Capital and Ribbit Capital, five people involved in the negotiations told the Times.
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“This is a strong sign of confidence from investors that will help us continue to further serve our customers,” Josh Drobnyk, a Robinhood spokesman, said in an email to the Times. The firms reportedly declined to comment.
FOX Business.com has also asked Robinhood for comment.
In return, investors will receive additional equity in the company.
