It was a really bad day at a once-flying Silicon Valley startup, but for many (now ex-) employees, it got worse.
Robin Hood (hood) – Get the Robinhood Markets Inc. reportThe troubled brokerage, which has caught the attention of Gen Z investors, can no longer rest and is laying off 23% of its workforce.
It started when the company announced that it had been fined millions of dollars. Ironically, the problem is related to understaffing in one of these key areas.
Chief executive Vlad Tenev said most of the layoffs would be among staff in operations, marketing and project management. blog post.
Earlier this year, Tenev said the company would cut 9% of its workforce, but the cut wasn’t enough from a financial standpoint.
“It’s not enough,” he said.
“We are seeing further deterioration in the macro environment, with inflation hitting a 40-year high, along with a broad crypto market crash. This further reduces client trading activity and assets under custody,” Tenev said in a blog post.
“We are overstaffed in this new environment. As CEO, I approve and take responsibility for our ambitious staffing trajectory — it’s up to me,” he said.
The layoffs involved 780 employees, according to the company’s filing with the Securities and Exchange Commission.
They are part of the company’s restructuring into a general manager structure. Robinhood said it will incur $30 million to $40 million in cash restructuring and related costs related to layoffs.
In addition, the company’s chief product officer, Aparna Chennapragada, is leaving the company.
The layoffs come just a year after Robinhood went public, and 18 months after it caught the attention of Wall Street as the go-to venue for day traders (GME) – Get the GameStop Company Report and AMC Entertainment (asset management company) – Get AMC Entertainment Holdings Inc. Class A Report soaring.
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Details of the company’s future operations, including restructuring its structure, will be provided when the company holds an all-hands meeting on Thursday, Tenev added.
“We will move to a general manager (GM) structure, who will have broad responsibility for our individual business,” he said. “This change will flatten the hierarchy, reduce cross-functional dependencies and eliminate redundant roles and positions. .”
Employees affected by the layoffs “will have the opportunity to remain employed by Robinhood and receive their normal wages and benefits (including equity vesting) until October 1, 2022,” Tenev wrote. “They will also receive cash severance, COBRA medical, dental and vision insurance premiums and job search assistance (including selection from the Robinhood Alumni Talent Directory).”
decrease in users
Robin Hood faces more pain. The company, which went public in July 2021 at $38 a share, reported second-quarter revenue of $318 million, compared with estimates of $321 million, according to Refinitiv data.
The brokerage also reported a loss of 34 cents per share, compared with an estimate of 37 cents, according to Refinitiv data.
Robinhood’s total net income was $318 million, up from $299 million in the first quarter, due to income from cryptocurrency activities and net interest.
Total net income for the second quarter of 2021 was $565 million.
The report also showed a drop in monthly active users and assets under custody.
other problems
Earlier in the day, Robinhood’s cryptocurrency unit was fined $30 million by the New York Department of Financial Services for violating anti-money laundering and cybersecurity regulations.
Shares of Robinhood have tumbled 76% over the past year as the Gen Z investors it seeks appear to have suffered heavy losses as cryptocurrency prices tumble, while the stock market is battered by recession fears over high inflation fears and Fed rate hikes slumped over concerns.
Robinhood was trading at $9.07 in after-hours trading. It reached a 52-week high of $85 shortly after its listing.
more fines
Over the past few years, Robinhood has been under scrutiny from regulators and paid $135 million in fines. The brokerage paid $65 million in 2020 when the SEC said it misled customers and paid a $70 million fine in 2021, when the industry’s regulator, the Financial Industry Regulatory Authority, said it misled customers and was responsible for the outage .
Since its launch, Robinhood has sought to democratize investing and appeal to a new generation of investors, but has faced slowing trading volumes impacting the cryptocurrency market and broader financial markets.
