Popular trading app Robinhood reportedly maxed out its credit line during market upheaval


Robinhood reportedly maxed out its $200 million credit line amid market turbulence late last month, though the firm said it later returned the capital it tapped.

The company – which pioneered zero-commission stock trading in the form of an app – is known for its 10 million-strong client user base and millennial appeal. But its users have cried foul as the company struggled to stay online during recent coronavirus-triggered market upheaval. The app suffered from three outages in the past two weeks, most recently on Monday.

As Bloomberg reported Tuesday, the 17-hour outage last week was the result of a software issue tied to unusually high trading activity. But the firm is still investigating what caused Monday's outage. According to a statement to Bloomberg, Robinhood's platform is now "fully operational" and the team is working to "improve [its] service during these historic and volatile market conditions.” 

Meanwhile, Robinhood withdrew its entire $200 million credit facility from Barclays Plc, Citigroup Inc. and JPMorgan Chase & Co., sources told Bloomberg. 

The firm told Bloomberg that the decision to max out its credit line had nothing to do with the outrage. "Our capital position remains strong," said the statement. "We determined it was prudent to draw on our credit line during the week of Feb. 24 in light of market volatility. That capital was returned in full last week."

However, Bloomberg Intelligence analyst David Ritter argued that "companies don't tap their credit line unless they need to."

Without commenting on the specific incident, he believes that a move to draw out a company's entire credit facility is "perhaps not a good signal with regard to their cash burn, which could make creditors nervous."

Trending Stories

Get Your Crypto
Daily Brief

Delivered daily, straight to your inbox.

Will Sanctions Drive Russia into the Arms of Cryptocurrencies?

From the removal of many Russian banks from SWIFT to a seemingly constant flow of new sanctions, Russia’s invasion of Ukraine has left many to wonder: Is the country likely to lurch towards cryptocurrencies? And if so, what does this mean for businesses that are holding and/or using crypto? Crypto and sanctions evasion Although crypto […]
Read Full Story
Sponsored Post

Layer-2 Scaling Solutions: A Framework for Comparison - Commissioned by Polygon

Ethereum had a breakout year in 2021. It’s native asset, ETH’s, market capitalization surpassed $500 billion for the first time. Its network facilitated upwards of $7 trillion value transfer. Non-fungible tokens (NFTs) emerged as another “killer application” that have put its technology on the global stage and caught the attention of the masses.
Read Full Story
May 5, 2022, 3:17PM UTC