Reading between the lines, they ran out of capital to post the required collateral for the trades.
They've been dancing around the subject because they don't want to trigger a bank run, but this is likely why they had to suddenly raise $1 billion and draw down their credit lines yesterday.
It appears they reached a point where they simply couldn't afford to support the buy orders on the volatile stocks any more. They likely had 2 options:
1) Shut down the entire platform until they could raise enough additional capital to post the required collateral. It's difficult to retain users and raise another round if you literally have to turn your service off on the hottest trading day every.
2) Shut down buy orders on the few stocks that were driving the capital requirements over the limit, at least allowing users to continue to sell.
Frankly, I think the narrative that Robinhood users are driving this situation has been greatly exaggerated. A few weeks or months from now, I think we'll learn that the majority of volume came from institutional investors rather than retail users. Redditors may have sparked the situation, but hedge funds are certainly capitalizing on it.
They've been dancing around the subject because they don't want to trigger a bank run, but this is likely why they had to suddenly raise $1 billion and draw down their credit lines yesterday.
It appears they reached a point where they simply couldn't afford to support the buy orders on the volatile stocks any more. They likely had 2 options:
1) Shut down the entire platform until they could raise enough additional capital to post the required collateral. It's difficult to retain users and raise another round if you literally have to turn your service off on the hottest trading day every.
2) Shut down buy orders on the few stocks that were driving the capital requirements over the limit, at least allowing users to continue to sell.
Frankly, I think the narrative that Robinhood users are driving this situation has been greatly exaggerated. A few weeks or months from now, I think we'll learn that the majority of volume came from institutional investors rather than retail users. Redditors may have sparked the situation, but hedge funds are certainly capitalizing on it.