On Tuesday, Robinhood CEO Vlad Tenev revealed that 9 percent of the company’s full-time employees will be laid off.
Reuters reported earlier this year that Robinhood had 3,400 workers, and while the story did not specify full-time vs. contract staff, TechCrunch estimates that this layoff will effect about 300 individuals.
The consumer investment and trading service firm, which went public at $38 in July 2021, had its value peak at $85 per share before falling to under $10 per share after a sustained slide. In light of its layoff news, the firm lost 3.75 percent in today’s trade (the market was down overall) and another 5% in after-hours trading.
While Robinhood has had some good news recently — the company’s stock rose 25% in March when it announced that it was expanding its equity trading hours in order to facilitate 24-hour-a-day activity — the erstwhile unicorn has also had a slew of problems. Last November, for example, the corporation disclosed a data breach that affected millions of its subscribers.
We reported earlier this month that both Robinhood and cryptocurrency exchange Coinbase benefited from going public while markets were strong, stating they were “fortunate that they went public when they did.” They were able to make their debut when the market was hot and float at appealing levels.
What has transpired afterwards is beyond their control, but because they are repriced on a daily basis, they don’t have a large, illiquid price tag slapped on their chest that they must now meet in a future IPO.”
Tenev wrote on the company’s recent two years in a blog post today, calling it as “hyper growth fueled by various causes such as pandemic lockdowns, cheap lending rates, and fiscal stimulus.” He stated the seven-year-old firm “increased net funded accounts from 5 million to 22 million and revenue from $278 million in 2019 to over $1.8 billion in 2021″ over that period. We roughly 6Xed our staff from 700 to approximately 3800 in that time frame to fulfil customer and market expectations.”
Tenev disclosed that this resulted in $6 billion in cash on the balance sheet.
He said that, like with every organisation, with expansion comes new job postings to handle that growth, which resulted in certain jobs and job functions being duplicated.
“After carefully examining all of these variables, we found that reducing Robinhood’s team is the best solution for improving efficiency, increasing velocity, and ensuring that we are responsive to our clients’ evolving demands,” he continued.
The layoff news comes only days before Robinhood is set to release its financial results for the first quarter of 2022. Robinhood will release its first-quarter earnings on April 28th, according to the company’s investor relations page. The company’s move to lay off a substantial chunk of its workforce might be a method to avoid investor wrath if its performance fall short of expectations.
Analysts estimate Robinhood will report a loss of $0.36 per share on revenue of $355.78 million in the first quarter, according to Yahoo Finance averages.
As the savings and investment bubble that TechCrunch widely chronicled faded, Robinhood’s valuation has eroded; to its credit, the firm was quite adept at obtaining external funding during its peak. It’s less obvious how it’ll handle a time of slower, or even negative, development. According to the company’s S-1 filing, In Q1 2021, Robinhood recorded total revenues of $522.2 million, implying that the firm will have achieved a negative year-over-year growth rate if current projections for the most recent quarter are met.
In normal trading today, the value of Coinbase, an American consumer crypto trading firm, was also considerably down, losing much more ground in after-hours trading. Consumer crypto trading activity grew rapidly at both Coinbase and Robinhood. If Robinhood performs poorly, it may erode investor trust in Coinbase’s upcoming Q1 earnings.
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