Should You Sell Robinhood Stock as Company Lays Off 23% of Staff?

Photo illustration in Brazil - 12 Apr 2022
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On Aug. 2, Robinhood announced it was laying off 23% of its staff, following the 9% of staff it laid off in April. The newest round of layoffs came as result of the “additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash,” which “has further reduced customer trading activity and assets under custody,” CEO Vlad Tenev said in a blog post.

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While employees from all functions will be impacted, the changes will be concentrated in the company’s operations, marketing, and program management areas, Tenev added in the statement.

The company started trading on the Nasdaq under the ticker “HOOD” in July 2021. Shares are down 43% year-to-date and 77.5% year-over-year. They were up 13.8% late morning on Aug. 3.

Peter Cohan, a senior lecturer at Babson College and author of “Goliath Strikes Back,” told GOBankingRates that since peaking at $85 shortly after going public, Robinhood stock has lost 89% of its value.

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“When it went public, I suggested investors avoid the stock because it was too dependent on crypto trading and it had no competitive advantage,” Cohan said. “It has continued to shed users and suffer regulatory woes. Unless the crypto winter suddenly gets a blast of global warming, the only thing to keep this company from running out of cash — it has $6 billion left and its operations consumed $1.3 billion in the second quarter — would be for an established brokerage to acquire it. The people behind its 11.8% short interest are likely to continue to benefit from its decline.”

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The company also reported second quarter earnings on Aug. 2, with $318 million in net revenue — up from $299 million in the first quarter, but a far cry from the $565 million reported in the second quarter of 2021, according to an earnings statement. It also saw a decline in its monthly active users, which decreased 1.9 million to 14 million, “as customers navigated the volatile market environment.”

And on that same day, the New York State Department of Financial Services fined Robinhood’s crypto arm $30 million for a failure “that resulted in significant violations of the department’s anti-money laundering and cybersecurity regulations,” Adrienne A. Harris, the department’s superintendent, said in a statement.

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Hayden Hughes, CEO of crypto social trading platform Alpha Impact, told GOBankingRates that “Robinhood aggressively grew over the past years, hiring more than 3,000 people to accomplish over 600% top-line growth.”

“The dominant narrative this year has been that it’s all one trade: there’s a perception on Wall Street that the Fed may be able to taper inflation. If it can, firms like Robinhood may be in line for a reprieve from what has been a challenging few quarters as the firm has laid off over 30% of its workforce during an inflation-induced bear market in equities and crypto,” he said.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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