Economy, stock market and business news for August 2, 2022

Economy, stock market and business news for August 2, 2022

Credit…Sasha Maslov for The New York TimesDavid Yaffe-Bellany

Robinhood, the trading app that popularized one-click trading and helped fuel last year’s meme-stock frenzy, said Tuesday it was laying off about 23 percent of its workforce. work

Vlad Tenev, the CEO of Robinhood, said in a blog entry that the layoffs would affect employees across the company, especially those in operations, marketing and program management roles.

Robinhood declined to comment on the layoffs.

The announcement followed closely on the heels of cuts in April, when Robinhood laid off 340 workers, or about 9 percent of its workforce at the time. Since then, wrote Mr. Tenev, the further worsening of the economy, including inflation and the crypto market crash, has “reduced customer trading activity and assets under custody.” The price of Bitcoin has more than halved this year, to around $23,000 per coin. The cryptocurrency rose to $66,000 by the end of 2021.

The layoffs come as part of a wave of job cuts at tech companies, including some cryptocurrency firms. In June, cryptocurrency exchanges including Coinbase and Gemini announced they were laying off employees. Last week, Shopify, an online marketplace, announced it was cutting 10 percent of its 10,000 employees.

In his note on Tuesday, Mr. Tenev said Robinhood misjudged the economy and trading activity. “As CEO, I approved and took responsibility for our ambitious staffing trajectory, that’s up to me,” he wrote.

The company also released its own second quarter results on Tuesday, it reported that its monthly active user count fell to 14 million in June, down 1.9 million.

The turmoil represents a significant fall for Robinhood, which became a key player in the meme craze in early 2021, when investors flocked to boost shares of companies including video game retailer GameStop and the AMC movie chain. On January 27, 2021, GameStop stock closed up nearly 1,800 percent from a few weeks earlier, a record. Robinhood then restricted trading of some meme stocks. The restrictions sent shares tumbling. Lawsuits, a Securities and Exchange Commission investigation and congressional hearings soon followed.

Robinhood’s stock price soared during meme trading. As of August 7, 2021, the company was valued at $46 billion, up 60% from its valuation a week earlier. But its shares have fallen 50 percent since the start of the year as they continue to face the downside.

The layoffs come at a difficult time for financial technology companies.

Coinbase, the publicly traded cryptocurrency exchange, laid off 18 percent of its staff in June amid the crypto market slump. Other major crypto companies, such as OpenSea, Gemini and Crypto.comthey have also made job cuts.

“Everybody over-hired: Coinbase over-hired, Robinhood over-hired. When money was easy, they were just hiring, hiring, hiring,” said Dan Dolev, senior analyst at Mizuho. “I’m not surprised to see these cuts.”

The global value of the cryptocurrency market has dropped to about $1 trillion from $3 trillion last year, when enthusiasm for cryptocurrency trading peaked and the price of Bitcoin hit a new high.

Robinhood has been working to build its crypto arm this year, listing new coins and launching a crypto wallet product. “The one thing I liked least about Robinhood is its crypto exposure,” Mr. Dolev said. “Anything without intrinsic value is always prone to trouble.”

Also on Tuesday, the New York State Department of Financial Services made the announcement to fine Robinhood’s $30 million crypto operation for violations of its anti-money laundering and cybersecurity regulations.

“As its business grew, Robinhood Crypto failed to invest adequate resources and attention to develop and maintain a culture of compliance,” Adrienne A. Harris, the superintendent of financial services, said in a statement.

Cheryl Crumpton, Robinhood’s associate general counsel, said in a statement that the company was “pleased” that the deal had been finalized. “We have made significant progress in building industry-leading legal, compliance and cybersecurity programs, and we will continue to prioritize this work to better serve our customers,” he said.

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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!