FinTech: Robinhood Rides Gamestop Tumult To $3.4B Debt Financing
The social trading app and millennial favorite broker raised the money over a weekend.
In a sprint to gain scale after the Gamestop (NYSE: GME) episode showed the massive adoption of trading by retail investors, Robinhood raised $3.4 billion from top-notch investors. The firm, which charges no commissions, said it intended to “fuel record customer growth.” (Robinhood)
The amount of $3.4 billion includes $1 billion that Robinhood snagged on January 29. Investors including ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA participated in the round led by Ribbit Capital.
The Gamestop fracas
Last week, a group of retail traders, including the now-infamous Wallstreetbets, raided the short positions held by hedge funds in gaming retailer Gamestop. The en masse buying frenzy created a huge short squeeze on the funds, many of whom had to close their shorts. GME short-sellers are reportedly down billions of dollars as a result of the incident.
The concerted trading activity also compelled Robinhood to restrict trading pending financing for margin deposits.
Meanwhile, short-sellers across the markets are on red alert after the Gamestop ‘Wall Street Vs Main Street’ battle. No longer can they take their cushy positions for granted.
Long-time shorts hater Elon Musk also fuelled the attack by drawing attention to the Wallstreetbets subreddit. He probably tasted sweet satisfaction, having battled short-sellers in Tesla (NASDAQ: TSLA) in the past. Short sellers in TSLA too were decimated in the recent prodigious rally in the stock.
Shorts on the back foot or not, Robinhood enjoyed hefty trading volumes and customer growth. According to one report, it added 600K users on Friday alone.
Hence the need for more capital, and lots of it.
“This round of funding will help us scale to meet the incredible growth we’ve seen and demand for our platform,” said Jason Warnick, CFO, Robinhood. “We are humbled by our customers’ response to our offering, and remain inspired by everyday people taking control of their financial futures.”
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