Robinhood is reportedly borrowing at least 'several hundred million dollars' from banks amid GameStop trading frenzy

Robinhood; Samantha Lee/Insider

• Robinhood is drawing on credit lines from its lenders, Bloomberg reported Thursday.
• The trading app is tapping into "at least several hundred million dollars," according to Bloomberg.
• Robinhood is popular among the retail investors behind this week's market frenzy involving GameStop.
• Visit Business Insider's homepage for more stories.

Robinhood is drawing down lines of credit to the tune of "at least several hundred million dollars," Bloomberg reported Thursday.

The quick decision to seek additional funds from its lenders, which include JPMorgan Chase and Goldman Sachs, suggest that this week's trading frenzy has put a strain on the company, according to Bloomberg's Matthew Monks and Michelle Davis. 

Robinhood did not respond to a request for comment on this story.

The trading app is popular among the online community r/WallStreetBets, a group of mostly retail investors who sparked massive market swings by targeting short sellers' positions in companies including GameStop, AMC Theaters, and Nokia.

Read more: How hedge funds are tracking Reddit posts to protect their portfolios after the Wall Street Bets crowd helped tank Melvin Capital's short positions

The high volatility prompted Robinhood and other brokerage firms to temporarily halt trading of those shares.

In an email to users, Robinhood attributed the company's decision to restrict trading to having to comply with financial requirements including SEC net capital obligations and clearinghouse deposits, that it said protected investors and the stock market. 

Read more: Robinhood user launches class-action suit against the trading app hours after it blocked purchases of GameStop

But the move sparked outrage from customers, the broader retail investor community, several progressive lawmakers including Reps. Alexandria Ocasio-Cortez and Ro Khanna, regulators, and even Elon Musk, a popular figure among r/WallStreetBets members.

Democrats in Congress have said they will hold at least two hearings about Wall Street's practices following the GameStop short-squeeze.

Read more: One chart shows how 3 GameStop shareholders gained nearly $4 billion in a week

Robinhood has tapped its credit lines during periods of market volatility in the past. In March 2020, it maxed out its credit lines during wild market swings in the early stages of the COVID-19 pandemic. 

Read the original article on Business Insider

from Business Insider https://ift.tt/3r1SNjM
via IFTTT