GameStop was among 13 companies that Robinhood restricted trading for Thursday on its mobile app. 

Robinhood raises $1B after GameStop debacle and lawsuit

Robinhood has raised more than $1 billion from its existing investors, the New York Times reports, after users flooded its trading app seeking to drive up the share price of GameStop and others shorted by hedge funds.

The fundraise coincides with a class-action lawsuit being filed against Robinhood after it restricted trading on the app, drawing the ire of millions of retail investors.

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A community of Reddit users is behind the coordinated bull run that has led to extreme stock market volatility over the past several days. The activity has put pressure on Robinhood to pay those who are owed money from their trades while making sure it has enough cash for its clearing facility. Sequoia Capital and Ribbit Capital are said to be among the investors contributing to the fresh round.

On Thursday morning, Robinhood restricted trading in the stock of 13 companies, including GameStop, AMC Entertainment and BlackBerry, only allowing users to close out their positions. Robinhood co-founder Vladimir Tenev later tweeted that the app would allow limited buys of those companies’ stocks. Other major online brokerages such as Charles Schwab’s TD Ameritrade and Interactive Brokers Group also restricted trading of certain companies’ stocks.

The lawsuit, filed in the Southern District of New York, claims that by restricting retail investors’ access to trading amid a meteoric stock-price rise in companies like GameStop and AMC, Robinhood manipulated the open market. Several other federal lawsuits have reportedly been filed against Robinhood.

The stock kerfuffle has also drawn the eyes of several lawmakers. Rep. Alexandria Ocasio-Cortez of New York tweeted about the need to know more about Robinhood’s decision to curb trading. And lawmakers in the House and Senate have pledged to hold hearings on the recent market occurrences.

WeWork reported to be in talks with SPACs, other investors

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WeWork may still go public after all.

  • The SoftBank-controlled provider of shared office space is reportedly in talks that could result in it being listed through a reverse merger with a blank-check company at a valuation of around $10 billion.
  • If completed, such a deal would close a circuitous journey to the public markets for a company whose original IPO plans collapsed in chaos more than a year ago.
  • The Wall Street Journal reported that WeWork has received offers from more than one party about a reverse merger with a special-purpose acquisition company, leading to talks with a SPAC affiliated with Bow Capital.
  • WeWork has also received offers to raise a private funding round, the Journal reported. If it goes that route, it would remain a private company.

A MESSAGE FROM WORLD BUSINESS CHICAGO & P33

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The new capital of post-pandemic innovation

2020 saw a once-in-a-lifetime jolt in venture capital, where investors are now flocking to resilient startup hubs like Chicago.

Chicago startups not only stepped up in the fight against COVID-19, but navigated the ongoing pandemic as an opportunity to innovate, collaborate and evolve. Investors are flocking to quality, especially since Chicago has recorded the highest ratio of exit value to invested capital of any other US city. For example, Rheaply was able to raise $2.5 million in a seed round led by leading Midwest investor Hyde Park Angels, and successfully scaled through partnerships with the likes of AbbVie and the US Defense Logistics Agency.

Learn more about the Midwest tech capital via the recently published Chicago VC Ecosystem Report by World Business Chicago and P33.

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Faraday Future joins reverse-merger craze; read PitchBook’s EV/Mobility Handbook

Electric car maker Faraday Future plans to go public through a $1 billion reverse merger with Property Solutions Acquisition Corp., joining a stampede of private EV companies that have made the leap by teaming up with blank-check companies.

  • That deal boom is the subject of PitchBook’s newly published EV/Mobility SPAC Handbook, which maps out the startups that have completed SPAC mergers (or announced plans to do so). Other highlights of this analyst note:
  • Introducing the PitchBook SPAC Mobility Index, a basket of 26 EV and mobility companies that went public through SPAC reverse mergers with a combined value of $100 billion.
  • The Index is coming off a red-hot second half of 2020, when it notched a 77.7% return.
  • See analysts’ top picks for future EV and mobility SPAC merger targets, including lidar specialist AEye, automaker Lucid Motors and EV platform provider Rimac Automobili.

The Gores Group launches yet another SPAC

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One of private equity’s most prolific SPAC pioneers is at it again.

The Gores Group, the firm run by longtime SPAC bull Alec Gores, has filed with the SEC to raise $300 million for blank-check company Gores Holdings VIII, just one week after the seventh Gores Holdings SPAC filed for an IPO of its own. Gores Holdings VI completed a $345 million IPO in December, while Gores Holdings V raised $525 million last August. And Gores Metropoulos II, co-sponsored by The Gores Group and Metropoulos and Co., raised $450 million in yet another SPAC IPO last week.

All those vehicles will be trying to replicate the success of Gores Holdings IV, which struck a $16.1 billion deal last September to combine with mortgage origination company United Wholesale Mortgage, marking the largest SPAC merger on record. Alec Gores himself turned an $80 million profit on the deal, Bloomberg reported.

Gores has long touted the use of SPACs, which have soared in popularity among private equity firms in the past year as both a path to liquidity and an alternative way to acquire companies. The first Gores Holdings SPAC consummated its reverse merger back in 2016, combining with Hostess Brands in a $2.3 billion deal.

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