Robinhood reportedly raises $1bn emergency funds after surge of investment activity amidst GameStop chaos

After a tough week, investing app Robinhood has reportedly raised more than $1bn in fresh capital from existing investors after being strained by high volumes of trading.

It is not clear what investors supplied the emergency funds, according to a report from The New York Times.

The investing app has been pushed to its limits over the past week after a huge surge in activity caused by traders backing companies such as gaming store GameStop. This has left Robinhood having to pay customers that are owed money from trade, whilst supplying cash to its clearing facility to stop potential losses for trading partners, the article said.

Robinhood came under a lot of fire last week when it stopped people from buying stocks for companies like GameStop. The platform stated users would be able to close their position on GameStop’s stocks, but that they would not be able to buy any additional shares.

This decision was met with a lot of backlash from people, including democratic representative Alexandria Ocasio-Cortez who called for an inquiry into why it shut down trades.

To continue operating, the trading app took out a line of credit from six banks, for between $500m and $600m, the article said.

After this, Robinhood reached out to its investors for emergency capital to help it through the surge in activity. Previous backers deploying capital include Sequoia Capital and Ribbit Capital, it said.

Robinhood previously raised $660m in its Series G round in 2020. The funding round brought its valuation up to $11.7bn and was supported by Andreessen Horowitz, Sequoia, DST Global, Ribbit Capital, 9Yards Capital, and D1 Capital Partners.

Last week, small traders on the subreddit WallStreetBets teamed up to support the stock of a handful of companies like GameStop and Nokia. It came as a fight against hedge funds and other aggressive traders that had bet on these companies failing. The investment surge has caused hedge funds to lose billions of dollars.

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