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Why would they have needed to draw down their credit line and then pay it back over a two week period? I don't have an answer to this question.
by harryh 7y ago
Why would they have needed to draw down their credit line and then pay it back over a two week period? I don't have an answer to this question.
- deleted 7y ago[deleted]
- bonestamp2 7y agoI can't get past the paywall, so maybe the article answers this question. But, in case not, one major reason could be margin. If you pay Robinhood $5/month then you have access to borrow money from them to buy stock. The first $1000 is interest free and additional "margin" incurs interest. When the stock market plunges, some people will see that as an opportunity to buy more stock at a reduced price. If they don't have any liquid funds in their account, borrowing money from the broker is instantaneous (assuming you've previously enabled it). I don't know what happened, but I could see their line of credit getting eaten up very quickly if enough investors decided to leverage their available margin. If investors sold those shares within two weeks, they could pay back the credit line.