Robinhood is axing 9% of its 3,800-strong workforce as retail investment declines and zero-fee stock trading becomes the industry norm.
Once seen as a champion of small investors largely ignored by traditional stockbrokers, Robinhood now finds itself in a crowded space, struggling to remain competitive amid established competition.
Its workforce has ballooned into a less-than-optimal behemoth, with redundant roles and superfluous positions.
“This rapid headcount growth has led to some duplicate roles and job functions and more layers and complexity than are optimal. 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 consumers,” said CEO Vlad Tenev.
Robinhood’s meteoric rise
Robinhood experienced a meteoric rise in popularity during the pandemic, ushering new investors into meme stocks and cryptocurrencies with its zero-fee trading.
It catered to a market largely ignored by traditional brokerages: those with a few hundred dollars to invest and not wanting to pay a $5 fee for each trade.
It was targeted primarily at younger investors wanting in on the stock market, even if it was through fractional shares.
However, equity trading numbers in the U.S. have dropped 7% from the first quarter of last year, leaving Robinhood and other brokerages struggling for market share.
In an attempt to bolster further growth, the company is launching other new products this year across three business areas: brokerage, crypto, and spending/saving.
‘Financial position strong,’ claims CEO
Sentiment around Robinhood’s first-quarter earnings report due tomorrow is not optimistic, considering it has racked up over $2 billion in losses since its initial public offering less than a year ago.
Stock is down 75% since, with an additional drop of 5% during extended trading, following the announcements regarding staff cutbacks.
Nevertheless, the CEO says the company’s “financial position remains strong with over $6 billion in cash on our balance sheet.”
Tenev said that the company will “continue to prioritize internal opportunities for automation and operational efficiency” and that they will provide further details for outgoing employees on new job placements, healthcare benefits, and severance packages.
BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.