(Jan 29): New York markets had just fired up, and the investing world was tuning in for Thursday’s episode of the continuing drama: Legions of Robinhood Markets investors versus hedge-fund Goliaths.
But within minutes, a shock wave invisible to the outside world rattled the mechanics of Wall Street — sending Robinhood rushing for more than US$1 billion of additional cash. The stock market’s central clearing hub had demanded large sums of collateral from brokerages including Robinhood that for weeks had facilitated spectacular jumps in shares such as GameStop Corp.
The Silicon Valley venture with the wildly popular no-fee trading app came to a crossroads. It reined in the risk to itself by banning certain trades and unwinding client bets — igniting an outcry from customers and even US political leaders. By that night, word was emerging that Robinhood had raised more than US$1 billion from existing investors and drawn hundreds of millions more from bank credit lines to weather the storm.