By Alicia Maher
Popular crypto and stock trading platform, Robinhood, has announced that it would let go of nearly 10% of its workforce. Thus, about 345 full-time employees of Robinhood are about to become jobless. The platform’s chief executive, Vlad Tenev, cited the economic downturn the company is facing as the reason for laying off the workers.
He explained that the platform experienced a rapid increase in active users during the heat of the pandemic, but that is no longer the case in recent times as the number of active users continues to plummet. Consequently, Robinhood shares have lost nearly 73% of their value in the last two quarters. Following the announcement of a possible layoff of its workers, Robinhood’s share price dipped by another 6% during Tuesday’s extended trading session.
Can Tenev Rescue The Situation?
Despite being listed on the Nasdaq stock exchange last July at $38.5 per share, it now trades at $11/share even though it had hit a peak price of $86 previously. While explaining why the company is taking such a drastic step, Tenev stated that “based on our evaluation of the best way to move the company forward, we discovered that this step is the best way we can improve our effectiveness and overhaul our services to meet the needs of our clients.”
He further stated that the firm would enhance its product offerings as the year winds down, including expanding its product offerings to cover brokerage and spending. However, he debunked the claims that Robinhood is laying off its staff because it is financially strapped. Tenev responded, “Robinhood has $6B in cash at hand,” and its finances are sound.
While many traders lauded the platform’s one-click, commission-free trading feature, others opined that it doesn’t quite suit riskier options like options. Despite having a simple UI and charging near-zero trade fees, the competition (particularly e-trade) often claims that the Silicon Valley startup encourages unwholesome trade practices among novice and young investors. Robinhood strengthened its workforce by nearly 300% between 2019 and last year, as its staff strength rose to 3,800.
Over Duplication Of Tasks
Tenev also said that the increase in staff strength hadn’t been corroborated with an efficiency of task accomplishments. Instead, it has resulted in the creation of unnecessary positions and an over-bloated workforce. Hence, the need for the layoffs.
Tenev also said in an emotion-laden voice, “taking this step wasn’t easy at all. However, we are strongly convinced that it is for the best of our beloved company. It will help us stick to accomplishing our core objectives and achieve our goal of democratizing finance.”
Apart from stating that Robinhood isn’t financially strapped, Tenev did not mention what investors could expect when the firm released its Q1 earnings on April 28 after the close of day trade sessions that day. However, the last financial report showed that the platform’s active users decreased by one million between Q3 2021 and Q4 2021.