Rapidfire expansion often comes with a crash but few have been as big as trading platform Robinhood (HOOD). Amid converging crises of declining crypto revenue, inability to regain prior traction and butting heads with the SEC, Robinhood took one more fall and announced that is cutting a major part of its workforce.
Founded as a trading platform meant to appeal to millennials and untraditional investors, Robinhood expanded to have over 22.7 million accounts and 3,800 employees by the end of 2021.
Massive Expansion Comes With Massive Responsibility
Co-founder and CEO Vlad Tenev said that, as Robinhood continued its path of expansion, a number of "duplicate roles and job functions" became financially difficult to maintain.
"Today we made the difficult announcement that we are letting go approximately 9% of our full-time employees," Tenev wrote in a blog post on April 26.
The trading platform soared in popularity amid the GameStop craze in 2021. Many new investors were quick to sign up for new accounts in order to jump into GameStop and other volatile meme stocks.
The company launched an IPO at $38 a share in July. Since then the stock has fallen by more than 70% and over $20.47 billion in market capitalization has disappeared. The lost market cap puts the company at risk of a future takeover — as Robinhood was founded on a model of "disrupting" traditional banking and investing, such a move could be a major blow for users.
'Scrutinizing Our Headcount Growth Targets'
"We are also scrutinizing our headcount growth targets, and making sure that we continue to prioritize internal opportunities for automation and operational efficiency that serve our customers," Tenev wrote. "Doing so enables us to be more resilient in hard times, and stronger during the good."
Tenev repeated predictable corporate talking points of "anticipating and being responsive to changes" but the massive letting-go indicates deeper difficulties at the company. Robinhood also said that it is looking for "opportunities for automation and operational efficiency" (in other words, outsourcing jobs that used to be held by humans to machines.)
"We will begin reaching out to each of you [departing colleagues] individually to discuss the next steps, including the significant support we will provide around separation packages, healthcare, and job search assistance," Tenev wrote.
Robinhood Shares Are Not Doing Well
Shares fell in after-hours trading following the announcement on Tuesday, April 26.
Robinhood plans to release first-quarter results after the bell on April 28. In January the company said it anticipates first-quarter revenue of less than $340 million -- down 35% compared with the same period in 2021.
While analyst opinions on whether Robinhood is going through a temporary slump or has exhausted its early momentum differ, the company has been losing revenue in several key components (crypto trading, in particular) and not showing ability to regain anywhere near the success of 2021. Earlier this month, Robinhood announced users would be able to trade the Shiba Inu cryptocurrency, which saw massive gains last year.
The much-anticipated (or, depending on how you look at it, much-feared) earnings call will further illuminate Robinhood's trajectory.
"In the long term, there may be light at the end of the tunnel for Robinhood. But what is of concern is the issue of demand," Bernard Zambonin wrote for TheStreet in April. "Based on engagement levels losing steam and the company's revenues being highly sensitive to the performance of the crypto market, this seems compromised for the short to medium term..
