In Wake of The Gamestop (GME) Scandal, Robinhood Secures $2.4bn From Investors

The first quarter of 2021 has certainly been one that the online trading platform, Robinhood, is unlikely to forget. January saw the coming together of new and experienced retail investors alike on the online forum, Reddit, and its subforum r/wallstreetbets, to invest in the gaming retailer GameStop.

Interestingly, along with r/wallstreetbets, as we reported, that r/Bitcoin also saw an influx of over 200,000 new members amid these developments.

Since then, Robinhood has faced severe public scrutiny, along with extreme market volatility, on account of the massive influx of investment. As a result, the trading platform has managed to raise an additional $2.4 billion from investors. In total, it has managed to raise more than $3.4 billion, exceeding the total amount it raised back in 2013.

During an earlier interview, Robinhood Chief Executive stated that the clearinghouse initially requested $3 billion in order to back up its trades, which were “about an order of magnitude than what it typically is.”

Following on from this interview, Robinhood company spokesman added that this massive influx of new investment capital demonstrates that, while the company finds itself in the center of a PR storm, its investors carry a great deal of confidence in it.

“This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we’ve seen this year… We’re witnessing a movement of everyday people taking control of their own financial futures, many investing for the first time through Robinhood.”

While the first use of this capital aims to support the huge influx of investment orders, the company spokesman has added that these funds would expand its financial literacy programs while increasing access to its services and products.

Robinhood's GameStop Fiasco

While investor confidence is high, the same can't be said of the public, the latter of which have condemned the platform for its obstruction of retail investors.

US Senator for Missouri, Josh Hawley, has been one of many outspoken and dissenting voices against RobinHood and its current standing position of restricting investors to one share each in Gamestop and AMC stock.

While Robinhood modeled itself as a challenger to conventional investment platforms, Hawley points his barbs at this hypocrisy, likening it to mainstream tech platforms.

“But like the tech platforms, Robinhood wasn't really about its users. Its bread was buttered by selling the data on users' trades to the big players—the elite guys, like Citadel—to give them inside tips on where retail investors were sending their money. And the Citadel guys, in turn, pay off their regulators—like treasury secretary Janet Yellen—in their years away from government for favors when they're back in power.”

Robinhood's decision to lockout investors was linked to the investment surge's impact on several hedge funds, entities that invested against Gamestop's share price's upward performance, such as Melvin Capital, which was forced to accept rescue capital from neighboring funds like Citadel LLC.

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