App-based brokerage Robinhood has raised $1 billion in emergency funds, amid the Reddit-fueled trading surge that the company has been at the center of. According to Forbes, a company spokesperson confirmed that Robinhood received $1 billion from existing investors. According to the NY Times, those investors will in return receive “additional equity in the company.” The Times also reported that Robinhood also brought in several hundred million from bank credit lines, but the company reportedly would not comment on this.
Speaking to Forbes, the Robinhood spokesperson said that the extra financing from investors “is a strong sign of confidence from investors that will help us continue to further serve our customers.” Notably, the company has been under fire for the past 24 hours, after halting trades on some of the high profile stocks such as Gamestop and AMC. CEO Vlad Tenev defended the move as the “correct” thing to do in order “to protect the firm and protect our customers.” Tenev also called the company’s new financial windfall a preemptive measure and denied speculation that it was due to the company not having enough cash on hand.
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Robinhood, the trading app, said it was raising an emergency infusion of more than $1 billion from its existing investors. The app has grappled with an extraordinarily high volume of trading this week as investors have piled into stocks like GameStop. https://t.co/iRhvZENVMU
— The New York Times (@nytimes) January 29, 2021
Robinhood may need some of that new money to help with legal battles, as one class-action lawsuit has already been filed by the company, and others could be on the way. Attorney Alexander G. Cabeceiras announce don Thursday that he had filed a lawsuit against the company for “purposefully, willfully, and knowingly removing the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise, thereby deprived (sic) retail investors of the ability to invest in the open-market and manipulating the open-market.” In a statement, Cabeceiras blasted the company’s mission statement, “democratize finance for all,” saying that “this is simply not true.”
Another law firm, ChapmanAlbin, also implied that it may possibly bring a lawsuit against Robinhood. In a statement, attorney Philip Vujanov said that ChapmanAlbin was “investigating claims on behalf of Robinhood users that were affected and suffered losses as a result of investing in Gamestop or AMC.” He added, “Robinhood appears to be up to the same old tricks, recruiting social media influencers to encourage individuals to sign up and fund a Robinhood account and beginning purchasing shares of securities such as Gamestop and AMC, with no consideration as to the suitability of the purchases.”
