Robinhood Markets is cutting about 23% of its full-time staff as the flashy online brokerage continues to reel from a sharp slowdown in client trading activity.
The job cuts mark the second round of layoffs this year at Robinhood, which in April cut its workforce by about 9%. Combined, the two rounds have cut more than 1,000 jobs at the company.
The layoffs are accompanied by a broader company reorganization, Vlad Tenev, Robinhood’s chief executive, said in a message published on the company’s blog. In the statement, Tenev said the previous round of layoffs in April “did not go far enough” to help the company cut costs.
“Last year, we took many of our operations roles under the assumption that the increased retail engagement we had seen with the stock and crypto markets in the Covid era would persist into 2022″ , Tenev said in the message. “In this new environment, we are operating with more staff than necessary. As CEO, I approved and took responsibility for our ambitious staff trajectory, that’s up to me.”
Robinhood also pushed ahead with the release of its second-quarter results a day earlier than expected, reporting that its monthly active users fell to 14 million, down 34% from a year earlier. Revenue fell 44% to $318 million.
Launched less than a decade ago, Robinhood ushered in a free stock trading phenomenon during the Covid-19 pandemic, thanks to its user-friendly, mobile-friendly online brokerage platform.
In the second quarter of last year, Robinhood’s best ever, according to public filings, the company had more than 21 million active users, who flocked to the app to trade flashy stocks, options and cryptocurrencies.
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But the love of the pandemic has seen its fortunes relax this year as markets have fallen and customers are no longer confined to their homes as they were during the Covid-19 pandemic. Revenues tied to customer trading activity fell 55% in the latest quarter to $202 million.
Robinhood’s share price fell this year, ending Aug. 2 at $9.23, down 76% from its initial public offering price of $38 last year. Its shares fell 1.6% in late after-hours trading.
Robinhood increased staffing rapidly during the Covid-19 pandemic to cope with increased demand for its services. On the company’s earnings call in April, Tenev said the company increased its headcount to nearly 3,900 in the first quarter of this year from about 700 at the end of 2019. The reduction on August 2 will bring the workforce to around 2,600.
In his blog post, Tenev said all employees would receive an email and a Slack message with their employment status immediately after Tuesday’s company-wide meeting where the layoffs were announced. Tenev said the employees who were fired will be able to continue working until Oct. 1.
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“The reality is that we overhired, particularly in some of our support roles,” Tenev said later on the call with reporters. He noted that support, operations, marketing and program management employees would be most affected.
A number of tech companies have laid off employees in recent months as they grapple with slowing growth and the threat of a looming recession. Twitter, Netflix and Tesla are among those that have cut staff.
Within the brokerage landscape, Robinhood has been most affected by the current market environment. Compared to the larger, more established players in the industry, Robinhood users tend to be younger and have less money in their brokerage accounts. Robinhood CFO Jason Warnick said Robinhood customers tend to invest in growth stocks and cryptocurrencies. Both categories were affected by falling markets this year.
In addition to slowing growth, Robinhood has come under the watchful eye of regulators. The New York State Department of Financial Services said on August 2 that it fined Robinhood’s cryptocurrency trading unit $30 million for alleged violations of anti-money laundering regulations and cyber security
Meanwhile, the company has faced questions about the future viability of part of its business model, after Securities and Exchange Commission Chairman Gary Gensler earlier this year outlined a revamp of trading rules that could threaten one of the main ways Robinhood makes money.
As its business has struggled this year, Robinhood has increasingly been considered a takeover target by some market watchers, particularly in the highly competitive brokerage industry. In May, one of the biggest names in cryptocurrency, Sam Bankman-Fried, announced an investment of approximately $648 million in Robinhood in exchange for 7.6% of the company’s Class A shares.
Any outside investor, including Bankman-Fried, would face an uphill battle mounting an aggressive takeover bid for Robinhood, due to a dual-class share structure that gives Tenev majority voting control and Baiju Bhatt, the other co-founder of Robinhood.
Warnick reiterated on the Aug. 2 media call that Robinhood intends to continue as an independent, standalone company.
“We have an incredibly strong balance sheet with $6 billion in cash and we have a lot of momentum on the product side,” he said. “As opposed to being acquired, we actually think we should be looking more aggressively at opportunities to acquire other companies that help accelerate our innovation.”
Warnick added that Robinhood plans to launch tax-advantaged retirement accounts later this year, following the earlier launch of other products, including a new debit card. Some former employees, clients and analysts, however, have criticized the brokerage for being too slow to introduce new products that could diversify its revenue stream.
Email Caitlin McCabe at caitlin.mccabe@wsj.com
This article was published by The Wall Street Journal, part of Dow Jones
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