Following a company-wide meeting Tuesday afternoon, CEO Vlad Tenev of the retail trading app Robinhood announced a 9% cut of staff.
He said the firm faced a downturn after massive growth in resources and headcount, and the stock fell 4% on the news in after-hours trading.
“Throughout 2020 and H1 2021, we went through a period of hyper-growth accelerated by several factors including pandemic lockdowns, low-interest rates, and fiscal stimulus,” Tenev wrote in a blog post. “To meet customer and market demands, we grew our headcount almost 6X from 700 to nearly 3,800 in that time period.”
The firm will post quarterly earnings after market close on Thursday. Tenev said that though 342 people will lose their jobs, the firm’s financial position remains strong, with over $6 billion cash in pocket. He also said they are still hiring top talent to help build new crypto, brokerage, and saving products.
As evidence, Tenev said net funded accounts rose from 5M to 22M, and revenue from about $278M in 2019 to over $1.8B in 2021, spurring their massive hiring spree.
He said a myriad of changes in the world economy led to the decline in growth, including global conflict, economic uncertainty, and high inflation.
In the six months after the firm went public on the NASDAQ, Wallstreetbet’s favorite firm has collapsed in value, from a high of $55 to a current $10 per share.
Latest mass purge of staff
Due in part to the forces Tenev mentioned, tech valuations have sunk. When it comes to mass firing, two now make a trend after the social media bonanza of the Better.com mass Zoom firing. In December, Better.com CEO Vishal Garg took to Zoom to fire 900 employees on the call, then about 10% of Better.com’s 9,000-person workforce.
“If you’re on this call, you are part of the unlucky group that is being laid off,” Garg said on the infamous call. “Your employment here is terminated effective immediately.”
The CEO took a leave of absence after apologizing for “blundering his execution” by his actions during the Zoom call and subsequent communications before taking a break.
Robinhood was on top
About a year ago, at the height of retail investor fervor for stock betting, Robinhood was the place to be. Tens of millions, possibly those armed with government stimulus checks, took to the app to blow up the prices of beloved brands. Gamestop experienced a short squeeze, where multibillion hedge fund short positions were overtaken by retail fury, sending the stock price exploding.
Those that know the story know how it ended: the DTCC, the clearinghouse to end clearinghouses, called Robinhood late at night and demanded a massive addition to its reserves. Allegedly the message: cover these bets with $2 billion cash, your market makers like Citadel Securities that happily exercise options from consumers are not happy.
The Exchange, in line with its terms of use, paused trading and buying in hot stocks enough to make some breathing room, and retail investors moved on. Soon eyes moved to NFT sales during a massive crypto bull run.
Since then, Robinhood has attempted to branch out and convince users to return, launching crypto products and wallets, but the IPO could not have come at a worse time for consumer confidence.
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CEO Tenev said in closing that departing colleagues would receive significant support in the form of health care and job search assistance.
“To our departing colleagues, thank you for all that you have done in support of Robinhood and our mission, and we wish you well in the future. To the rest of the team, thank you in advance for your ongoing commitment to Robinhood’s mission and the hard work that will be required to achieve it.”
