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- Robinhood (HOOD), which reported earnings a day earlier, posted a 44% drop in second-quarter revenue and a loss of $295 million.
- 23% fewer employees are focused on operations, marketing and project management.
- Crypto Unit fined $30 million by New York regulators.
Shares fell 3% in extended trading.
Robinhood Markets Inc. (HOOD) is laying off nearly a quarter of its workforce and closing offices after a rough first year as a public company. Who can forget the inspirational story of a college roommate who wanted to revolutionize stock trading, especially for the masses? At its IPO last summer, Robinhood (HOOD) boasted that 50% of retail trading accounts opened in the U.S. from 2016-21 were on its platform. However, the trade boom fueled by lockdowns and stimulus has lost steam, with Robinhood shares down 50% so far this year.
The app-based brokerage reported second-quarter results a day early and said it posted a net loss of $295 million, or 34 cents a share, for the period. Net sales fell 44% year over year to $318 million. The number of active users on the platform fell by nearly 2 million to 14 million in the second quarter of 2022, while assets under custody fell 31% quarter-on-quarter to $64.2 billion after Robinhood traded tech stocks and cryptocurrencies — customers are popular, It’s sold out.
To make matters worse, Robinhood Markets Inc.’s cryptocurrency unit was fined $30 million by the New York City Financial Services Commission after it was accused of violating anti-money laundering and anti-cybersecurity regulations. According to the order filed Tuesday, the department must hire an independent consultant to oversee compliance. The company announced its expectations last year.
Second round of layoffs this year
The company announced in a blog post on Tuesday that it will lay off 23% of its workforce, or about 780 employees, as part of a restructuring that will also result in the closure of two of its offices. Among the notable departures, chief product officer Aparna Chennapragada will pay $300-40 million in severance and benefits with the company, as well as $150-20 million related to the closing of the office, the filings show. “Today, we parted ways with many very talented individuals in an extremely challenging macro environment,” wrote Robinhood co-founder Vlad Tenev.
The announcement marks the latest round of layoffs for the seven-year-old brokerage, which in April announced it would cut 9% of its full-time workforce. Robinhood said employees who lost their jobs have the option to stay until October 1, and there are no further layoffs planned.
Merger and Acquisition Talk
The broker’s poor performance, coupled with a sharp drop in shares since hitting highs around $85 last year, has prompted suggestions of a possible takeover. In April, billionaire cryptocurrency exchange FTX founder Sam Bankman-Fried took a 7.6% stake in the company worth $648 million. According to FTX, no formal merger talks have yet been held. Robinhood CFO Jason Warnick dismissed the idea that Robinhood is interested in merging with another company: “As opposed to acquisitions, we think we should be more aggressively looking at acquiring other companies.”
Robinhood Markets Inc. 4H Chart, August 3, 2022
Technically, we appear to have found a bottom near $6.82 on June 16 before recovering. From a 4-hour perspective, we appear bullish as we continue to make higher highs and higher lows given the technical structure. We broke and retested the 100 SMA on the 4-hour chart with more upside potential. Yesterday’s announcement did not change the 4-hour structure, and if the price holds above the 4-hour swing low, we could see $10-10.20 in the short-term, which matches the 100 SMA on the daily chart.
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