By John Gruber
Sky Guide brings the beauty of the stars down to Earth.
Kate Kelly, Erin Griffith, Andrew Ross Sorkin, and Nathaniel Popper, in a multi-byline report for the NYT:
On Thursday, Robinhood was forced to stop customers from buying a number of stocks like GameStop that were heavily traded this week. To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation.
Robinhood still needed more cash quickly to ensure that it didn’t have to place further limits on customer trading, said two people briefed on the situation who insisted on remaining anonymous because the negotiations were confidential.
Robinhood, which is privately held, contacted several of its investors, including the venture capital firms Sequoia Capital and Ribbit Capital, who came together on Thursday night to offer the emergency funding, five people involved in the negotiations said.
Basically, Robinhood blew it by not being honest about this. They should have just come clean and explained that they were short of cash to cover all the action on these stocks. But because they were embarrassed to appear insolvent, they destroyed their ethical reputation instead. And now it’s come out that they were in over their heads financially anyway.
Even today, Robinhood is not even close to allowing users to trade GameStop freely. A friend with a Robinhood account was only able to buy five shares before getting an error message that he held the maximum number of shares. And when you sell GameStop on Robinhood, you can only sell at market price, not a limit order. It’s a complete clown show.
★ Friday, 29 January 2021