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Robinhood (HOOD) Trims Workforce After Rapid Growth

Robinhood's headcount had grown almost six-fold between 2019 and 2021

Commission-free retail brokerage Robinhood Markets, Inc. (HOOD) announced on Tuesday, April 26, that it's reducing staff levels by about 9% after going through a period of hyper-growth during the pandemic.

Key Takeaways

  • Discount retail broker Robinhood announced that it's reducing its workforce by around 9% to improve efficiencies.
  • Robinhood's headcount grew almost six-fold from 700 to 3,800 between 2019 and 2021 through a period of rapid expansion.
  • The company said that it would be introducing new products across brokerage, crypto, spending, and saving as well as focusing on expanding globally.
  • Robinhood reports its first-quarter earnings on Thursday, April 28. Analysts expect the discount broker to post revenue of $355 million, 32% below last year's meme-stock fueled corresponding quarter.

Robinhood, which became synonymous with a meme-stock trading frenzy early last year, grew its headcount almost six-fold from 700 to nearly 3,800 between 2019 and 2021, driven by surging trading volumes, pandemic lockdowns, and government stimulus payments.

Brick-and-mortar video game seller GameStop Corp. (GME) saw its share price climb over 2,700% at the height of the meme stock trading craze in January 2021.

Robinhood CEO Vlad Tenev said that the unprecedented expansion had led to some staffing inefficiencies and that job cuts were needed to ensure that the brokerage continued to meet its customers' needs.

"This rapid headcount growth has led to some duplicate roles and job functions, and more layers and complexity than are optimal. 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," Tenev wrote in a company blog post.

Going forward, the company will review employee growth plans and "continue to prioritize internal opportunities for automation and operational efficiency," he added.

Tenev thanked Robinhood's departing colleagues for their services in supporting the brokerage's mission and said that the company would offer separation packages, healthcare, and job search assistance.

Product Offering Focus

Tenev also provided an update on the company's upcoming products, specifically outlining new offerings across brokerage, cryptocurrency, spending, and savings. Additionally, he noted that Robinhood's global expansion would continue to gather pace.

The discount broker, which also offers trading in leading cryptocurrencies such as Bitcoin and Ethereum, recently purchased London-based crypto app Ziglu to expand its reach into the United Kingdom and Europe. Earlier this month, Robinhood also launched its highly anticipated crypto wallet to 2 million customers.

Earnings Watch

Robinhood reports earnings on Thursday, April 28, after the closing bell. Analysts expect the company to post a first-quarter loss of 28 cents per share on revenue of $355 million. Although Wall Street expects the top line to contract 32% from the year-ago corresponding meme-stock fueled quarter, the forecast represents a slight improvement on the discount broker's bottom-line loss of 49 cents per share reported in the fourth quarter. In Tuesday's blog post, Tenev remarked that the company has more than $6 billion in cash on its balance sheet.

Robinhood shares closed the regular session on Tuesday, April 26, down 3.75% at $10, but the share price slumped an additional 2.6% in extended-hours trade after the announcement. The stock continues to trade well below its $38 July 2021 initial public offering (IPO) price and has underperformed tech stocks more broadly, which have fallen 13.5% over the same period.

An IPO refers to the process of offering shares of a private corporation to the public in a new stock issuance. An IPO allows a company to raise capital from public investors.

Article Sources
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  1. Robinhood. "A Message From Our CEO and Co-Founder Vlad Tenev."

  2. Financial Times. "Almost 900,000 Accounts Traded GameStop at Peak of Meme Stock Craze."

  3. Robinhood. "All Eligible Waitlist Members Now Have a Crypto Wallet - Lightning Network is Coming to Robinhood."

  4. Zacks Investment Research. "Key Expected Earnings Data."

  5. Barrons. "Robinhood to Cut 9% of Staff After Hyper-Growth Period."

  6. CNBC. "Robinhood Cutting About 9% of Full-Time Employees."

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