Robinhood Axes Almost A Quarter Of Staff
US-headquartered trading broker, Robinhood, is reducing its headcount by nearly a quarter in the face of an uncertain economic landscape and falling revenues. This follows the 9 percent cut it made to its workforce in April.
Reduced Trading Activity
Robinhood was one of many trading platforms that did well in the global pandemic. Its commission-free trading app proved particularly popular with US investors.
But with the pandemic over and inflation rapidly rising, the firm has seen its active monthly users fall by a third, from around 21 million in the second quarter of 2021 to 14 million in June 2022. Quarterly revenues are also down 44%, falling to $318 million in 2022 versus the $565 million reported for the same period in 2021.
CEO of Robinhood, Vlad Tenev, commented: “Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the Covid era would persist into 2022.” Tenev went on to say: “In this new environment, we are operating with more staffing than appropriate. As CEO, I approved and took responsibility for our ambitious staffing trajectory – this is on me.”
780 Employees Affected
In a company update, all staff were told they would receive “an email and a Slack message with your status – with resources and support if you are leaving”.
But while the firm has promised a severance package and support to look for a new job, there will be many disgruntled, soon-to-be ex-employees, that will be understandably worried about finding new employment in the current climate.
The Whole Truth?
It is true that interest rates are rising, the crypto market is falling and a cost-of-living crisis is unfolding. All of which will undoubtedly impact the number of retail traders that are active on platforms like Robinhood.
However, the firm has also spent the last two years dodging criticism following a barrage of questionable decisions. The company hit the headlines in January of 2021 when it halted the purchase of shares in US firm GameStop, sparking outrage among amateur investors aiming to push up its price.
Robinhood has also come under fire for exposing retail investors to notoriously risky trading products, including meme stocks – shares and cryptos that gain traction on social media.
Then there was the serious security breach in November 2021, which saw the personal data of a third of its customer base compromised. And just the month before, a group formed of nearly seven million Robinhood clients were seeking to file a class-action lawsuit against the company over multiple outages on its stock trading app in 2020, which led to substantial losses for many users.
So, whether it is only the current crypto climate and rising interest rates that have led to a decline in its active users, we may never know. But what we do know is, that Robinhood has made enough poor decisions in recent years to question how they’ve managed to hold onto any customers at all…