Robinhood has raised $1 billion and tapped its credit score strains to help the buying and selling of GameStop and different high-flying shares.

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This story initially appeared on ValueWalk

The buying and selling app raised $1 billion from traders in a single day after tapping its credit score strains for $500 million. CNBC reviews that Robinhood raised the cash and tapped its credit score strains as a consequence of a liquidity crunch attributable to purchases of GameStop and different high-flying shares.

Nevertheless, the corporate’s CEO instructed the information community that tapping the credit score strains was proactive moderately than liquidity issues. Vlad Tenev mentioned they all the time draw on their credit score strains “as a part of regular daily operations.” Based on him, they use the capital to deposit with the clearinghouses to allow them to “allow ideally extra investing with fewer restrictions.”

Associated: Billionaire Investor Chris Sacca Cheers on GameStop Traders

On Thursday, Robinhood restricted buying and selling on GameStop, AMC and 11 different shares. The buying and selling app allowed prospects to promote shares however not open new positions. Robinhood additionally elevated margin necessities and mentioned it could routinely shut some positions if the shopper had been prone to not having sufficient collateral.

Why restrictions had been put in place

After closing bell on Thursday, the corporate mentioned it could permit restricted purchases of the 13 restricted shares on Friday. Robinhood has seen unprecedented ranges of buying and selling this week as traders who learn sure Reddit boards inspired one another to drive the costs of GameStop and different shares larger and better. Lots of the shares had been heavily shorted names, which meant that brief squeezes ensued as hedge funds had been compelled to cowl their positions.

CNBC defined that Robinhood should deposit cash right into a clearinghouse in response to commerce volumes. The corporate mentioned it restricted buying and selling on the 13 shares as a result of it could not meet the deposit necessities it anticipated. These necessities enhance when volatility rises.

Shares of GameStop and AMC surged once more in premarket trades as traders anticipated the loosening of restrictions from Robinhood. After the markets opened, they had been nonetheless within the inexperienced however trending decrease.