Robinhood CEO Vlad Tenev announced Tuesday that it was laying off 9% of its full-time employees.
Earlier this year, Reuters reported that Robinhood had 3,400 employees, and though that did not specify full-time versus contract, it looks like this cut may affect some 300 people according to TechCrunch calculations.
The U.S. consumer investing and trading service company, which went public at $38 in July 2021, saw its value peak at $85 per share before entering a steady decline that saw its value erode to a mere $10 per share. The company lost 3.75% in today’s trading — the market was lower today, overall — and another 5% in after-hours trading in light of its layoff announcement.
While Robinhood has reported some positive news in recent months — the company saw its value rise 25% in March following news that it was extending its equity trading hours toward a goal of supporting 24-hour-a-day activity — there have also been myriad struggles at the former unicorn. For example, the company announced a data breach last November that affected millions of its users.
Robinhood’s stock pops 25% on news of extended trading hours
Earlier this month, we reported that both Robinhood and crypto company Coinbase had an advantage of going public when the markets were good, saying they were “lucky that they went public when they did. They got to debut when market conditions were hot and could float at attractive levels. What has happened since is out of their control, but as they are repriced daily, they don’t have a huge, illiquid price tag stapled to their chest that they now have to live up to in a later IPO.”
In a blog post today, Tenev chronicled the company’s last two years, describing it as “hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus.” During that time, he said the seven-year-old company “grew net funded accounts from 5M to 22M and revenue from ~$278M in 2019 to over $1.8B in 2021. To meet customer and market demands, we grew our headcount almost 6X from 700 to nearly 3800 in that time period.” This resulted in $6 billion in cash on its balance sheet, Tenev revealed.
Like any company, with growth like that comes more job openings to manage that growth, which then ended up with some roles and job functions that were duplicated, he wrote.
“After carefully considering all these factors, we determined that making these reductions to Robinhood’s staff is the right decision to improve efficiency, increase our velocity, and ensure that we are responsive to the changing needs of our customers,” he added.
Timing
Robinhood’s layoff announcement comes days before the company is expected to report its Q1 2022 financial performance. Per the company’s IR page, Robinhood will report its first-quarter results on April 28th — the company’s decision to axe a large portion of its staff could be a way for it to get ahead of investor disfavor if its results won’t measure up to street expectations.
Per Yahoo Finance averages, analysts expect Robinhood to report a Q1 loss of $0.36 per share against revenue of $355.78 million.
Robinhood has seen its value erode as the 2020-2021 savings and investing boom that TechCrunch covered extensively faded; to its credit, the company was very effective at attracting external capital during its boom. How it will manage a period of lesser, or perhaps negative, growth is less clear. According to its S-1 filing, Robinhood generated total revenues of $522.2 million in Q1 2021, meaning that if the company manages to match current expectations for its most recent quarter, it will have earned a negative year-over-year growth rate.
The value of American consumer crypto trading service Coinbase was also sharply lower in regular trading today, losing more ground in after-hours turnover. Both Coinbase and Robinhood saw strong growth from consumer crypto trading activity. If Robinhood is underperforming, it could reduce investor confidence in Coinbase’s own pending Q1 results.
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