Robinhood Markets Inc, the US online broker that has emerged as a gateway for amateur traders challenging Wall Street hedge funds, has held talks with banks about raising US$1 billion in debt so it can continue to fulfill orders for heavily shorted stocks, people familiar with the matter said.
The capital raised would be separate from the US$3.4 billion in financing that Robinhood on Monday announced that it had secured from its investors since Friday last week.
It reflects the financial pressure that last week’s Reddit-fueled frenzy in shares such as GameStop Corp placed on the company, prompting it to restrict some trades.
Photo: AFP
Robinhood needs the money to backstop trades that its customers place, because its clearinghouse has asked for more collateral due to heightened volatility.
Robinhood chief executive officer Vlad Tenev on Sunday said that the trading app placed curbs on some transactions because the clearinghouse had asked for US$3 billion in collateral.
Robinhood started negotiations with banks about expanding its lines of credit or arranging a new one after it drained its revolving debt facility during last week’s frenetic trading, one of the sources said.
It is not clear how much debt Robinhood would be able to secure.
The sources asked for anonymity because the matter is confidential. Robinhood declined to comment.
Robinhood, which has become popular with young investors for its easy-to-use interface, is at the heart of a mania that began last week following calls by Reddit thread WallStreetBets to trade certain stocks that were being heavily shorted by hedge funds.
The online brokerage faced criticism from some of its users for placing restrictions on transactions.
Its woes have raised doubt over whether its plans to launch an initial public offering by April would stay on track.
The Menlo Park, California-based company was founded in 2013 by Baiju Bhatt and Tenev, aiming to democratize finance. Its platform allows people to make unlimited commission-free trades.
Robinhood on Monday said that its latest equity financing was led by Ribbit Capital, with participation from existing investors, including Iconiq Capital, Andreessen Horowitz, Sequoia Capital, Index Ventures and NEA.
Separately, the US Securities and Exchange Commission is keeping a close eye on stocks that have surged to extraordinary heights during the recent bouts of wild trading, but has seen no evidence that the broader market is under threat, said Allison Herren Lee, the regulator’s acting chair.
“We haven’t seen anything to indicate anything that suggests it would bring down the market,” Lee told National Public Radio in an interview.
Lee did not name the individual stocks that the commission is monitoring, although those that have captured the attention of Wall Street and Washington include GameStop and AMC Entertainment Holdings Inc.
GameStop has risen more than 1,000 percent since the start of the year.
The US House of Representative’s Financial Services Committee has scheduled a hearing on Feb. 18 on the tumult.
“When we see stock prices depart so wildly from fundamental valuations, we know there is a chance that people are going to get hurt,” Lee said. “We want people to know that there are risks involved here.”
Determining whether anyone tried to take advantage of the situation by manipulating share prices is a priority, Lee said.
The SEC is looking into the conduct of brokers and the role that short-selling — or betting against stocks — might have played in the recent events.
One challenge is that successful fraud cases often hinge on the SEC showing that traders spread false information to dupe others into buying or selling stocks.
“This one has a little bit of a different spin to it, it’s going to be a little more challenging because of the nature of it, but our enforcement division will rise to that challenge and they are working around the clock right now to figure that out,” Lee said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to