Retail trading app Robinhood has secured another $2.4bn, adding to the $1bn investment announced last week.
This sudden capital raise has come as a response to the surge of activity on the Robinhood platform. The app has seen a huge wave of investors buying stocks for companies including GameStop, putting the FinTech under a lot of pressure financially.
The capital injection will help it to build and enhance its products for consumers as well as invest into its financial literacy tools to help those new to investing better understand the ecosystem.
Ribbit Capital served as the lead investor to the combined $3.4bn capital injection, with contributions also coming from existing investors ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures and NEA.
Robinhood CFO Jason Warnick said, “This round of funding will help us scale to meet the incredible growth we’ve seen and demand for our platform. We are humbled by our customers’ response to our offering, and remain inspired by everyday people taking control of their financial futures.”
It was reported last week that Robinhood raised $1bn in emergency funds. The FinTech reportedly was strained by the activity needing to pay customers that are owed money from trade, whilst supplying cash to its clearing facility to stop potential losses for trading partners, according to a report from The New York Times.
It also had to take out a credit line from six banks for between $500m and $600m to continue operating.
Ribbit Capital managing partner Micky Malka said, “Robinhood has served millions of people who have felt left behind by America’s financial system. We’re confident that Robinhood will emerge stronger through this phase of growth and unprecedented demand.”
Robinhood has been in the middle of battle between small traders and Wall Street. A campaign initiated on the subreddit WallStreetBets pulled retail investors together to invest into a range of companies, including 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.
Robinhood came under fire last week when it stopped people from buying stocks in these companies. While users were able to close their position, they were not allowed to buy additional shares.
There was substantial backlash on this decision, with many taking to Twitter to highlight their anger. Democratic representative Alexandria Ocasio-Cortez was among those, and called for an inquiry into why it shut down trades.
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