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 CEO Vlad Tenev told CNBC yesterday that “there was no liquidity problem” when asked why trading on these stocks was halted. It sounds like there absolutely was a liquidity problem, in that Robinhood lacked liquidity.
Whatever the issue was, by not addressing it honestly and factually at the start, Robinhood allowed rumors and misinformation to swell out of control on Twitter and reddit that has caused massive damage to their reputation.