US online broker Robinhood has borrowed several hundred million dollars from banks in order to continue operating, Bloomberg has reported citing a source. The lenders include JPMorgan and Goldman Sachs, according to the magazine.
The New York Times has clarified the company has asked for about $500-600M from six banks. In addition, the broker has asked its existing investors, including Sequoia Capital and Ribbit Capital, for additional funding.
According to the NYT's sources, the investors will provide the startup with $1B in exchange for shares of the company at a discounted value tied to Robinhood's stock price. According to reports, the company intends to go public by the end of 2021.
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Robinhood and other brokers have previously suffered massive outages due to an influx of private investors. This has happened shortly after a large number of Reddit platform users have started buying the shares of the video game retailer GameStop. After that, the shares of other weak companies such as Nokia, BlackBerry, AMC and others have also started to rise.
As a result, the value of their shares has experienced a significant increase in a few days and the investment firms that had bet on the fall of these shares have lost billions of dollars.
On January 28, Robinhood suspended the purchase of shares of these companies. In response, a group of private investors filed a class action lawsuit against the broker, claiming the decision has been made in the interest of "large institutional investors" and not its customers.