Robinhood Raises Additional $2.4 Billion to Bolster Liquidity as WallStreetBets Saga Drags On

By Luigi Wewege Tuesday, February 2, 2021

Robinhood, an online trading company, announced it raised a further $2.4 billion on Monday to bolster its balance sheet.

An investor monitoring the stock market on their smartphone.

WallStreetBets Drama Continues

Just three days after raising more than $1 billion in new capital to improve its liquidity, Robinhood announced a new funding series worth $2.4 billion. The latest funding round was led by Ribbit Capital, in addition to existing investors ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA.

In addition, Reuters reports that the online trading business is considering raising a further $1 billion through the issuance of new debt. This would be in addition to the $3.4 billion the business has raised since Friday.

Aside from increasing the size of its balance sheet, the online trading business says it will use the raised funds to invest in greater access to financial literacy.

“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,” said Jason Warnick, CFO of the company.

The fact that a high number of VC firms were interested in investing in Robinhood doesn’t come as a surprise. The company had seen a tremendous rise amid an accelerated digital shift, pushing its business toward an expected initial public offering (IPO) in 2021.

“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,” said Micky Malka, Managing Partner at Ribbit Capital.

The latest quarterly report from the company shows why investors were eager to invest hundreds of millions of its capital in the online trading business. The company generated more than $200 million in Q4 via payment for order flow. For 2020, it is reported that Robinhood generated $675.1 million for offering services to over 10 million users.

Last week, the company found itself in the middle of the war between short-selling hedge funds and retail investors centered around Reddit’s “WallStreetBets” forum. Robinhood was forced to temporarily ban trading on certain stocks before allowing existing holders to buy just one additional share of GameStop. In an update posted yesterday, the online trading business now allows customers to own up to 20 shares of GameStop.

Summary

Online broker Robinhood has raised a total of $3.4 billion from investors since Friday with the company exploring options to raise a further $1 billion through new debt to improve its balance sheet.

About the Author


Headshot for author Luigi Wewege

Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.

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