Robbing Peter To Pay Paulie

Robbing Peter To Pay Paulie

After drawing down more than $500 million from a credit line with a half-dozen banks, Robinhood "still needed more cash quickly to ensure it didn’t have to place further limits on customer trading," The New York Times said, in the course of reporting that the company (or can I just call it an "app"?) tapped its VCs. According to the Times, Sequoia Capital and Ribbit Capital (among others) joined up to provide what was described as "emergency funding" for Robinhood, which is under fire from it
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11 thoughts on “Robbing Peter To Pay Paulie

  1. “But it took just 48 hours to act to save hedge funds.”

    Yup.

    In other news.

    “I don’t think there’s a single Republican who would vote for the $1.9 trillion bill,” said Sen. Mitt Romney (R-Utah)

    Pretty stark contrast.

  2. It’s too late for Citron to change this.

    Social trading is now loose. Like social media and social politics before it, it’s running far ahead of the previous generation’s ability (or desire) to grasp the implications of what’s going on.

    Look at crypto this morning – that’s social trading in action; I’m not even sure where it’s being driven.

    I sincerely hope that somewhere, there are some sociology or psychology PhD candidates mining reddit and its brethren for thesis material in culture creation. It’s happening there in real time: new language, new memes, new values, new ideas. Spend some time there and just sample it. Fascinating stuff.

    I fully expect that “GME meets bitcoin” will send H to all new heights of sardonic wit, but really there is something more serious going on here.

    1. So, the herd have moved on to crypto and at the moment Elon Musk is its pied piper.

      Musk added #bitcoin to his Twitter bio and endorsed dogecoin which promptly rose 500%.

      The wildebeests were led to new pastures – however briefly – by an iconoclast icon who has long ago become part of the establishment.

      I suppose that is appropriate.

  3. A few comments-

    Lets see how effective the Working Group on Financial Markets ( established in 1988 and comprised of Sec. Treasury, Chair SEC, Chair Federal Reserve and the Chair of Commodities Future Trading Commission) are at the intended goal of such commission- to enhance integrity, efficiency, orderliness and competitiveness of the financial markets while maintaining investor confidence. Hopefully, Janet Yellen responds to this higher calling and not to Citadel- who paid her gobs of money in “speaking fees” in the 12 months prior to her appointment. So far, it seems like their response is basically, “no comment “.
    I will be shocked if Robinhood survives- if you are going to gamble and regularly lose to “The House”, at least they will want to lose to a House they do not hate. There are other trading apps- including SoFi- ( Social Finance being taken public by Chamath). Those accounts at Robinhood can get moved overnight.
    No wonder China is putting controls in place for their financial markets watching what is going on here. I am all in favor of capitalism, just not crony capitalism.

  4. You just know that somehow this is all going to end badly for someone- my bet would be on the retail horde losing out. And the financial markets are being damaged as well. AOC and Ted Cruz are focusing on equality of retail traders vs. big guys. So it turns out Robin Hood did not have enough capital to support the explosion of trading on their platform. Seeing that, a temporary cutback on trading until they could raise capital is a reasonable response. I would be curious to see what solution Cruz or AOC would propose to fix that problem, other than what Robinhood was forced to do. Retail on their platform is braying and their saviours Cruz and AOC joined in- counterparty risk is a hard lesson to learn. We all learned more about it in 2008-9 and the REDDIT Bros are learning about it now. I am astonished at the lack of wisdom out there- what would everyone have said if Robinhood was undercapitalized, ran into an operational/financial problem and failed?

    1. You do realize that Robinhood is using a cover story to explain why it caved, right? It’s clear that a great deal of pressure was brought to bear on the company. After all, the people running Robinhood have a lot to lose what with the company getting ready to go public.

      As far as politicians, we live in the age of populism and social media. What else would you expect but personal base building?

  5. I’m waiting for the ‘social law enforcement’ to appear.

    Oh wait! That’s right they’re called militia and they already did.

    I’m not sure the ‘nation-state’ can withstand the forces unleashed by social media. Libya and Syria still haven’t recovered. I’m not sure the West in the long run will do any better. This looks a lot like Phillip Bobbit’s ‘market-state’ but even he I think would admit this is taking things far further and quicker than he imagined. God help us all.

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