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.
SECOND-RATE: Models distilled from US products do not perform the same as the original and undo measures that ensure the systems are neutral, the US’ cable said The US Department of State has ordered a global push to bring attention to what it said are widespread efforts by Chinese companies, including artificial intelligence (AI) start-up DeepSeek (深度求索), to steal intellectual property from US AI labs, according to a diplomatic cable. The cable, dated Friday and sent to diplomatic and consular posts around the world, instructs diplomatic staff to speak to their foreign counterparts about “concerns over adversaries’ extraction and distillation of US AI models.” Distillation is the process of training smaller AI models using output from larger, more expensive ones to lower the costs of training a powerful new
Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) have repeatedly hit new highs, but an equity analyst said the stock’s valuation remains within a reasonable range and any pullback would likely be technical. The contract chipmaker’s historical price-to-earnings (P/E) ratio has ranged between 20 and 30, Cathay Futures Consultant Co (國泰證期) analyst Tsai Ming-han (蔡明翰) told Central News Agency. With market consensus projecting that TSMC would post earnings per share of about NT$100 (US$3.17) this year, supported by strong global demand for artificial intelligence (AI) applications, and the stock currently trading at a P/E ratio of below 25, Tsai said the valuation
The artificial intelligence (AI) boom has triggered a seismic reshuffling of global equity markets, with Taiwan and South Korea muscling past European nations one by one. With its stock market now valued at nearly US$4.3 trillion, Taiwan surpassed the UK, Europe’s biggest market, earlier this month, data compiled by Bloomberg showed. South Korea is about US$140 billion away from doing the same. The tech-heavy Asian markets have shot past Germany and France in the past seven months. The shift is largely down to massive gains in shares of three companies that provide essential hardware for AI: Taiwan Semiconductor Manufacturing Co (TSMC, 台積電),
The US Department of Commerce last week ordered multiple chip equipment companies to halt shipments of certain tools to China’s second-largest chipmaker, Hua Hong Semiconductor Ltd (華虹半導體), its latest action to slow the country’s development of advanced chips, two people familiar with the matter said. The department sent letters to at least a handful of companies informing them of restrictions on tools and other materials destined for two Hua Hong facilities US officials believe make China’s most sophisticated chips, the people said. Top US chip equipment companies Lam Research Corp, Applied Materials Inc and KLA Corp, each of which has significant
RSS