American online broker Robinhood has recently raised a total of $3.4bn in funding from existing investors to cope with the frenzy for heavily shorted stocks.
The latest funding, which includes the $1bn the company raised last week, is more than at any stage since it was established in 2013.
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The latest round was led by Ribbit Capital and joined by investors such as ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures and NEA.
The funding will be used by the online brokerage firm for developing and enhancing its products to give further access to its users.
It also plans to offer financial literacy to its users.
Robinhood CFO Jason Warnick said: “This round of funding will help us scale to meet the incredible growth we’ve seen and demand for our platform.
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By GlobalData“We are humbled by our customers’ response to our offering, and remain inspired by everyday people taking control of their financial futures.”
Recently, posts on Reddit thread WallStreetBets fuelled trading mania for some stocks that were being shorted by hedge funds.
The trade of the shorted stocks led to an increase in deposit limits at its clearing house and Robinhood’s deposit requirements tied to equities had risen tenfold.
This forced the brokerage to restrict trading of stocks including GameStop and AMC Entertainment, as the clearinghouse had asked for $3bn in collateral. It had also started seeking emergency funding and was also in talks with banks to expand its lines of credit.
The restrictions irked the customers, leading to lawsuits being filed by them for placing such restrictions.
Ribbit Capital managing partner Micky Malka said: “Robinhood has served millions of people who have felt left behind by America’s financial system. We’re confident that Robinhood will emerge stronger through this phase of growth and unprecedented demand.”
