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“We determined it was prudent to draw on our credit line during the week of Feb. 24 in light of market volatility. That capital was returned in full last week.”

• cma 7y ago
  Why not “used all credit that was available to them”? Without “all” it would be confusing what was even being pointed out.
• odiroot 7y ago
  Or "Robinhood's CFO is doing their job right"
  • grandridge 7y ago
    Or hes afraid of there being no one willing to lend to him tomorrow
• caymanjim 7y ago
  > “Companies don’t tap their credit line unless they need to,” said David Ritter, an analyst at Bloomberg Intelligence, who spoke generally about the issue without commenting directly on Robinhood. When companies do, it’s “perhaps not a good signal with regard to their cash burn, which could make creditors nervous.” It's yet another sign that this company is teetering on the edge of collapse. That isn't irrational panic. They were completely offline for an entire day during the biggest market rally in over a decade, and have had smaller outages during other recent volatile trading days. This company deserves to crash and burn. Anyone who still keeps a balance there is insane. People have lost millions and are going to continue to lose because Robinhood is run by amateur clowns.
  • im3w1l 7y ago
    From what I heard they weren't the only brokerage with an issue. Maybe they had the worst issues, but I think it's also that their customers are more vocal than others.
    • bonestamp2 7y ago
      > their customers are more vocal than others And their haters. There's a very vocal group of traditional investors who hate Robinhood (and its users) for a variety of (mostly trivial) reasons. Robinhood's service problems over the past couple weeks are finally a legitimate reason for them to air their hate and they would love to see Robinhood fail.
      • caymanjim 7y ago
        I don't hate them, and prior to this week I'd have considered using them for simple equity trading. But they're clearly in over their heads, and simple risk management should lead people to find a safer venue. It's true that many other brokers from bit players to top-tier firms occasionally have trouble during intense market days. I've worked in finance on and off for decades, for brokerages, hedge funds, and market makers. I've written systems that process real-time market data and trade directly on exchanges. I'm well aware of the challenges in trade processing systems, and Robinhood simply hasn't built enough testing, redundancy, or scalability into their systems, as we're now seeing. It also happened on leap day, and there's speculation that their systems were simply unable to handle that. Robinhood denies it, but they also had problems on leap day 2016. There's no reason that a company like Robinhood can't succeed, and someone in that space will succeed. It may very well end up being Robinhood. But are you willing to bet your own money on that right now?
        • bonestamp2 7y ago
          My apologies if it sounded like I was implying that you hated them. I was just speaking in general. Particularly on r/wallstreetbets there are a lot of people who shame others who use robinhood and make jokes that don't reflect reality. Some of that is the 'bets sense of humor too of course.
  • brianpgordon 7y ago
    > Anyone who still keeps a balance there is insane. Robinhood accounts are protected by the SIPC. Although with other discount brokers introducing free trading, I would tend to agree with you that continuing to use RH with its simplistic interface and appalling execution is pretty silly.
    • JumpCrisscross 7y ago
      > Robinhood accounts are protected by the SIPC This is correct. But SIPC reimbursement can take months. For non-trivial balances, one may need a lawyer to prove ownership. After that, an accountant would likely be needed to reconcile records, including for tax purposes. (Tax forms are not automatically generated for brokerages in receivership.)
      • pesfandiar 7y ago
        We have a similar insurance for cash deposits in Canada. I've always imagined that for some balance (perhaps in thousands of dollars), you're better off just letting it go if the company goes down. Now that you mention taxes, I think letting go may not even be an option.
    • caymanjim 7y ago
      Yeah, I should have said "trades there"; I didn't mean literally keeping a cash balance. I wouldn't worry about losing cash or shares, but about losing the ability to trade during important market events. SIPC isn't going to help you if you were unable to trade.
    • hn_throwaway_99 7y ago
      For the wallstreetbets folks that like to post account charts: Why in God's name would you use a service that has no values on its y-axis. Doesn't everyone realize that makes the chart meaningless? Every time I see those meaningless charts it makes my skin crawl. But, I'm sure that Robinhood must be omitting those values on purpose, and the only reasoning I can come to is that they want their users to be less educated because it is more profitable for them.
  • scarface74 7y ago
    So would you judge money losing startups as harshly? What about YC darling Dropbox that has never made a profit? Netflix is borrowing billions of dollars trying to create and license enough content to stay competitive.
    • robbiep 7y ago
      judgement is still out on them but potentially. At the end of the day you have a service that is being subsidised by VC. Vis. Uber, Lyft, WeWork, The Warby Parker clones... The real question to come is if a drying up of liquidity is going to torpedo lots of ships. It is simply not possible for a loss making entity to continue losing money forever (unless you are the US Government)
    • deadmetheny 7y ago
      Dropbox going down for a day is unlikely to cause the loss of literal millions of dollars for most use cases. You can probably come up for some use care where WELL AKSHUALLY it will, but for the average person not being able to trade on a hot market day is a direct link to either potential or actual losses if you're, say, options trading.
    • justapassenger 7y ago
      Not an OP, but saying that company A is broken doesn't mean that companies B and C aren't broken. Once free money dries up, a lot of darlings will go down.
  • ping_pong 7y ago
    You are completely unknowledgeable about how finance works. If RH were worried about credit spreads widening, which actually happened, then drawing on the credit before while you can and having cash at hand makes a lot of sense before the banks won't accommodate your request. What they did sounds like a great strategy.
• deleted 7y ago
  [deleted]
• bhahn 7y ago
  The article touches on why the draw is significant irrespective of paying it back (albeit the source of the commentary is from the same parent company): > “Companies don’t tap their credit line unless they need to,” said David Ritter, an analyst at Bloomberg Intelligence, who spoke generally about the issue without commenting directly on Robinhood. When companies do, it’s “perhaps not a good signal with regard to their cash burn, which could make creditors nervous.”
  • JumpCrisscross 7y ago
    Revolving credit lines are usually revocable. Depending on what Robinhood drew the cash for, and the degree to which they have liquidity-source redundancy, it could imply their having been closer to an edge than was apparent.
• sushid 7y ago
  If you're going to quote the article, perhaps you should quote the rest: “Companies don’t tap their credit line unless they need to,” said David Ritter, an analyst at Bloomberg Intelligence, who spoke generally about the issue without commenting directly on Robinhood. When companies do, it’s “perhaps not a good signal with regard to their cash burn, which could make creditors nervous.”