Online brokerage firm Robinhood raised $2.4 billion from shareholders over the weekend, bringing the company’s fundraising total to $3.4 billion since Thursday as the company continues to address the fallout from volatility in stocks such as GameStop.
Robinhood called the investments, the most money the company has ever raised, “a strong sign of confidence from investors” and said that it “will help us build for the future and continue to serve people through the exponential growth we’ve seen this year.” The company said in a blog post that it plans to use the funds to “build and enhance our products that give more people access to the financial system.”
“This round of funding will help us scale to meet the incredible growth we’ve seen and demand for our platform. We are humbled by our customers’ response to our offering, and remain inspired by everyday people taking control of their financial futures,” Robinhood CFO Jason Warnick said in a statement.
The company said that the latest round of investments was led by Ribbit Capital with participation from existing investors.
“Robinhood has served millions of people who have felt left behind by America’s financial system. We’re confident that Robinhood will emerge stronger through this phase of growth and unprecedented demand,” Ribbit Managing Partner Micky Malka said.
Robinhood has faced sharp criticism from customers and politicians on both sides of the aisle after thousand-fold price surges in shares of GameStop prompted the company to introduce trading restrictions on a number of high-volatility stocks, at one point barring customers from purchasing new shares of GameStop at all. Several lawsuits have been filed against the company as a result, and both the House Financial Services Committee and the Senate Banking Committee plan to hold hearings to address the market activity and Robinhood’s policies.
Robinhood CEO Vlad Tenev defended the restrictions last week, citing financial obligations to market clearing houses and the costs associated with extremely volatile stocks. Transactions completed through online brokers such as Robinhood appear to be instantaneous to users, but most transactions actually take days to be settled, and brokers rely on market clearing houses to complete them. But clearing houses require collateral while the trades are being settled, and the more volatile the stock, the more collateral is required.
Depository Trust and Clearing Corporation, one of the largest clearing houses on the stock market, required nearly 100% of GameStop’s share price as collateral for each transaction, Denier said.
Despite the massive influx of cash, Robinhood is reportedly delaying its plans for an initial public offer, which investors were anticipating some time this year. Fox Business’s Charles Gasparino tweeted Monday that “plans for an IPO are on hold to focus on surviving the current drama over trading of stocks and settlement issues.”
SCOOP: Ppl inside @RobinhoodApp tell @FoxBusiness plans for an IPO are on hold to focus on surviving the current drama over trading of stocks and settlement issues. Execs say they have access to even more capital than additional amounts raised today. More @TeamCavuto 1230pm
— Charles Gasparino (@CGasparino) February 1, 2021
