Negotiating loans: Robinhood probably wants to raise more money before the IPO | message

—?? Robinhood plans to top up revolving credit lines
?? Loans are intended to improve the capital and liquidity position before the IPO
?? Robinhood recently had to take on new debt as part of the GameStop hype

The planned IPO of the trading app Robinhood is likely to be one of the most watched stock market events of the year. After speculation about the broker’s IPO plans had already been made, the latter announced in March that a confidential application for an initial listing had been filed with the US Securities and Exchange Commission. However, it is not yet known when the move to the floor will take place and what volume it will be.

Before Robinhood dares to go public and get fresh money by issuing new shares, the neobroker apparently wants to take on new debts and expand his bank loans.

Robinhood wants to improve position through loans

As insiders reported to “Bloomberg”, Robinhood is currently in talks with banks, which are about increasing revolving credit lines. This is to ensure that Robinhood is in a strong position in terms of capital and liquidity, a person familiar with the matter told the news portal. How much is the sum that the broker app wants to secure is not known.

In the case of a revolving loan, a fixed term and a maximum amount are agreed that can, but need not, be drawn upon during this period. During the term, the borrower can then request any amount and any number of partial payments at any time and repay them just as flexibly. All he has to do is ensure that the agreed maximum amount for the total outstanding loan amount is not exceeded. The revolving loan offers more flexibility than conventional loans – especially since, according to the Hanseatic Bank, there are usually no fees if it is not used. It simply offers a certain security that money is there if it should actually be needed.

The last point in particular could be particularly important for Robinhood, because just a few months ago the trading app was forced to run up new debts as part of the GameStop hype. Because the responsible clearing office suddenly demanded security deposits of three billion US dollars from the broker in order to adequately secure customer orders in view of the massive fluctuations in GameStop shares. According to “n-tv”, Robinhood then obtained 3.4 billion US dollars from investors and also negotiated loans with a volume of one billion US dollars with banks. However, it is not known to what extent these negotiations were successful and led to the expansion of existing credit lines or the approval of new credit lines. However, according to “Bloomberg” Robinhood’s existing credit lines already include a revolving loan of US $ 600 million from various banks such as JPMorgan, Goldman Sachs and Morgan Stanley.

Borrowing before IPO is not uncommon

It is not unusual for companies to secure a new line of credit shortly before going public. The South Korean online retailer Coupang, for example, tried to obtain a credit line of up to one billion US dollars prior to its IPO, reports “The Korea Economic Daily”. This did not harm the Coupang share in the least when it went public. Airbnb, Uber and DoorDash also secured loans in the run-up to the IPO, according to the news site. In these cases, too, the procedure can be explained by an improvement in the liquidity position, according to “The Korea Economic Daily”. In addition, it is also a common negotiation tactic to obtain better financing conditions for the IPO.

Finanzen.net editorial team