NEW YORK: As shares of Robinhood (HOOD) hit a new low on Tuesday afternoon, CEO Vlad Tenev revealed that the online trading platform will lay off 9% of its workers.
Robinhood’s financial condition was robust, Tenev claimed in a blog post, with over $6 billion in cash on its balance sheet. The layoffs, he explained, came after a time of rapid expansion that “led to some duplicate roles and job functions, and more layers and complexity than are optimal.”
Since the beginning of 2020, Robinhood has grown from 700 to 3,800 employees.
“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,” said Tenev.
Going forward, the company will “continue to prioritize internal opportunities for automation and operational efficiency,” Tenev wrote.
On Tuesday, the stock hit a low of $10, its lowest level since the business went public last July.
Robinhood went public at $38 per share and swiftly rose to $85 before plummeting. So far in 2022, stocks have lost 46% of their value, while the S&P 500 has lost 13%.
Retail investors, armed with stimulus checks and additional unemployment payouts, rushed into meme stocks like GameStop (GME) in early 2021, and the business played a crucial part in that rally. However, the spike was short-lived, and last quarter, Robinhood recorded a drop in monthly active users.
Goldman Sachs downgraded the business from neutral to sell in early April, citing investor disengagement as a result of weakening markets and waning Covid stimulus checks.
“We believe HOOD could continue to see higher levels of churn as these investors leverage their smaller dollar account sizes for everyday spending,” Goldman analysts wrote.
With typical account sizes of roughly $4,000, Robinhood tends to appeal to beginning investors. The average age of its customers is 31, with almost half of them being first-time investors, according to the business, making it more vulnerable to user churn during economic downturns.
Goldman does not see Robinhood as having a clear path to profitability, which is a bad indication as investors become more wary of unprofitable fintech companies.
The first-quarter numbers are set to be released after the bell on Thursday, but they were not mentioned in Tuesday’s blog post. The corporation lost $423 million in the most recent quarter.
In after-hours trading, shares of the company were down 5.5 percent.
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