Robinhood, the online broker at the center of the day trading boom, has raised $ 2.4 billion in its second capital injection in a week to support finances strained by turbulent trading.
The brokerage was hit by a surge in trade last week as retail investors gambled against short sellers, pushing up the price of previously unloved companies like Gamestop and AMC, the struggling movie theater chain.
The company’s latest round of convertible debt financing – which allows investors to swap their debt for equity – is as Robinhood faced a surge in demand for deposits at clearing houses that process stock and option transactions.
Robinhood chief Vlad Tenev said late on Sunday that the stock clearing house had requested $ 3 billion in margin calls on Thursday – during a week marked by chaotic trading in stocks that are popular with users – before negotiating a reduced amount. the company limits itself to certain shares.
The new injection of existing investors brings Robinhood’s total fundraising to $ 3.4 billion, after it brought in $ 1 billion last Thursday.
People briefed on Monday’s deal said it would help Robinhood continue to trade in stocks that are popular with private investors.
The announcement came as the frenzy of retail on platforms such as Robinhood and other US brokers rocked global financial markets.
Silver prices rose to its highest level in eight years on Monday, with the precious metal surging a whopping 12 percent to more than $ 30 an ounce, the largest intraday increase since 2008. Later that gain was cut to about 8 percent .
Traders and analysts said the surge was initially driven by a surge in interest among retailers. “It’s a silly message, it’s financial anarchy; someone will be hurt, ”said Ross Norman, an experienced precious metals trader.
The iShares Silver Trust, the largest ETF to track the metal, hit $ 6.1 billion in sales in New York Monday at lunchtime, putting it on track for one of its biggest trading days since its launch in 2006, Bloomberg found. data. According to data from VandaTrack, the fund was one of the top six destinations for retail investor inflow on Friday, as talks of an attempt to push the price of silver higher began to trickle into social media forums like Reddit.
Robinhood also faced a backlash last week from users of the popular r / WallStreetBets forum on Reddit, who rebelled against the start-up after it restricted hot stock trading. The curbs sparked several class action lawsuits. Robinhood relaxed some of the restrictions when trading reopened on Monday.
JMP Securities analysts said they expected rival brokers to take advantage of the situation at Robinhood to try to poach some of the group’s clients.
“We think this could stimulate some amount of account movement, but the sooner companies like Robinhood return to their normal operations, the less attrition we would expect,” JMP analysts wrote over the weekend.
Ribbit Capital, an early investor in Robinhood, led the $ 3.4 billion funding, which includes other existing investors such as Iconiq Capital, Andreessen Horowitz, Sequoia Capital, Index Ventures, and New Enterprise Associates.
Funding came from two separate tranches with different terms, according to people briefed on the deal. The most senior tranche allows investors to convert debt into equity at an implied valuation of up to $ 30 billion, while the junior portion would convert at a maximum valuation of $ 33 billion, the People said.
Interest in retail investments on Robinhood’s trading platform is not waning. The start-up had 20 million revenue-generating transactions in stocks, options and cryptocurrencies Friday, more than four times the average it reached during last summer’s stock trading boom, one person said of the numbers.
According to JMP, more than 600,000 people downloaded the app on Friday alone, compared to about 140,000 on peak days during a peak in March last year.