Financial News
Robinhood’s Bad Day Got Worse
Many (now ex-) employees at a once high-flying Roinhood had a terrible day just get worse.
What’s the best way to get out from under a multimillion-dollar fine? Employees at the company learned this lesson the hard way.
HOOD – Robinhood (film Troubled brokerage firm Get Robinhood Markets Inc., which attracted Gen Z clients, can’t get a break and is laying off 23% of its workforce.
A multi-million dollar fine was the first step in the process. It was ironic that the problem stemmed from understaffing in one of the company’s most important departments.
CEO Vlad Tenev said the majority of the layoffs will occur for those working in the operations, marketing and program management divisions, according to a blog post.
Earlier in the year, Tenev claimed the company will reduce its employment by 9 percent , but the cut was not sufficient financially.
“This did not go far enough,” he remarked.
“The macroeconomic situation has continued to deteriorate, with inflation reaching 40-year highs and the crypto market collapsing broadly.
This has further curtailed customer trading activity and assets under custody,” Tenev wrote in the blog post.
“In this new context, we are operating with more staffing than appropriate. As CEO, I agreed and assumed responsibility for our aggressive staffing trajectory – this is on me,” he said.
According to the company’s SEC filing, the newest wave of layoffs included 780 employees.
They are being brought in as a result of a company restructuring to create a structure centered on general managers. A restructure and related costs associated with the layoffs are expected to cost Robinhood $30 million to $40 million in cash.
In addition, Aparna Chennapragada, the company’s Chief Product Officer, is stepping down.
Less than a year after its initial public offering, Robinhood has announced that it is laying off hundreds of its employees, just as the meme stock mania has sent shares of companies like GameStop (GME) – Get GameStop Corporation Report and AMC Entertainment (AMC) – Get AMC Entertainment Holdings Inc. Class A Report surging.
According to Tenev, the company’s all-hands meeting on Thursday would include information on the company’s future activities, including an overhaul of its organizational structure. Tenev added. In the future, he claimed, “GMs would acquire broad responsibility for our individual businesses” in a General Manager (GM) structure. We’ll eliminate unnecessary jobs and positions and flatten hierarchies as a result of this modification.
Layoff victims “will be offered the opportunity to remain employed with Robinhood through October 1, 2022 and receive their regular pay, benefits (including equity vesting),” Tenev stated in his email. This includes severance money, payment of COBRA costs for healthcare (including dental/vision), and aid in finding a new work (including an opt-in Robinhood alumni talent directory).”
Growth in ad revenue
In Robinhood’s case, things are only getting worse. At $38 a share when it went public in July 2021, the business earned $318 million in its second quarter, compared to Refinitiv’s estimate of $321 million.
By Refinitiv‘s estimates, the brokerage lost 34 cents per share compared to 37 cents per share.
Revenue from cryptocurrency operations and interest earned by Robinhood pushed total net revenue to $318 million, an increase from the first quarter’s $299 million.
The second quarter of 2021 saw total net revenue of $565 million.
Monthly active users and assets in custody both decreased, according to the data.
Other Concerns
The New York Department of Financial Services has fined Robinhood’s cryptocurrency unit $30 million for allegedly breaking anti-money laundering and cybersecurity standards.
After falling by 76% in the last year, Robinhood’s stock has been hit hard by the fears of high inflation and a possible recession that have weighed heavily on its target demographic, Generation Z, as the stock market has collapsed in response.
After-hours trading saw Robinhood at $9.07. Shortly after coming public, it hit a 52-week high of $85 per share.
Finer People
Following regulatory scrutiny over the last few years, Robinhood agreed to pay a $135 million fine. The brokerage paid a $65 million fine to the Securities and Exchange Commission (SEC) in 2020 and a $70 million fine to the Financial Industry Regulatory Authority (FINRA) in 2021 after it was found to have misled consumers and caused outages.
This slowdown has affected both the cryptocurrency market and the wider financial markets since Robinhood’s start, making it difficult for the company to attract a new generation of investors.
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