Robinhood Struggles With the Monster It Created

Robinhood Struggles With the Monster It Created

If Robinhood got one thing spot on, it's that free sells.Prior to setting off a stock market firestorm last week, investors in Robinhood, the Menlo Park, California-based trading platform, were only too happy to keep fueling its growth. Now they have no choice.Robinhood faced crippling cash demands brought on by a Reddit subgroup named WallStreetBets, which was driving up the stock price of companies, including GameStop and AMC, that had been targeted by well-known short sellers. The stated goal: squeeze the shorts. The ensuing volume of orders pushed Robinhood into tricky territory with its cash position, when the clearinghouse that helps the firm process and settle trades asked the company to put up more capital to meet margin requirements. Robinhood responded by restricting trading on 13 stocks on Thursday, infuriating the WallStreetBets investors and sending prices on those stock down. To stabilize itself, Robinhood, which was founded in 2013 by Vlad Tenev and Baiju Bhatt with a mission to "democratize finance," then turned to early investors to raise more than $1 billion, in a matter of hours. The New York Times reported on Friday that the rescue funds came from venture investors including Sequoia Capital and Ribbit Capital. Meanwhile, after the platform reopened to full trading on Friday, amid criticism and a class-action lawsuit alleging it prioritized its high-end clients over retail investors, the prices