Robinhood Markets Inc. raised more than $1 billion in emergency funds to help cope with the extraordinary trading and excitement in heavily-shorted stocks such as GameStop Corporation (NYSE: GME) and AMC Entertainment Holdings (NYSE: AMC).
The online trading platform used credit lines to strengthen its balance sheet and remove its restrictions in the trading of GameStop and other volatile stocks. It is popular among young traders including those who are informed about stocks through Reddit forums such as the r/WallStreetBets.
The Reddit-charged day traders ganged up together and helped propel the stock prices of GameStop, AMC, BlackBerry, and other companies. Billionaire Chamath Palihapitiya also contributed to the parabolic rise in the stock price of Gamestop.
In an interview with CNBC, Robinhood CEO Vlad Tenev denied that the company has a liquidity issue. He explained that the company tapped its credit lines to allow investors trade with fewer restrictions.”
“By drawing on our credit lines which we do all the time as part of normal day-to-day operations, we get more capital that we can deposit with the clearinghouses and that will allow us to enable ideally more investing with fewer restrictions,” said Tenev.
