Robinhood, the app favoured by small investors who have sent the share price of certain stocks soaring, is to restore trading in companies including GameStop after securing a $1bn (£730m) injection from backers to handle the market frenzy.
The decision to resume what Robinhood said would be “limited buys” of stocks such as American Airlines and AMC, the world’s largest movie theatre chain and the owner of Odeon in the UK, sent GameStop’s stock up 99% to $389 a share in pre-market trading on Friday.
Robinhood has tapped existing investors and drawn down at least several hundred million dollars via a credit facility from banks led by JP Morgan and including Morgan Stanley, Goldman Sachs and Barclays.
A spokesperson for Robinhood early on Friday described the $1bn injection as a “strong sign of confidence” that will help it “further serve our customers”.
Robinhood also contacted existing investors, which include Sequoia Capital and Ribbit Capital, about emergency funding, according to the New York Times.
The move to stop trades outraged users of Robinhood, which says its mission is to “democratise finance for all”, and prompted questions from US politicians.
Vlad Tenev, Robinhood’s co-founder, took to Twitter to quash theories that the temporary ban was about protecting the hedge funds from making further huge losses.
“This decision was not made on the direction of any marketmaker we route to or other market participants,” Tenev said. “We plan to allow limited buys of these securities. We’ll continue to monitor the situation and make adjustments as needed. We cannot control, however, the lightning fast spread of information and misinformation that takes place on social media.”
Robinhood has published the new restrictions on trading, which covers 13 stocks including American Airlines, Blackberry, Nokia, AMC and GameStop.
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