The neo-broker Robinhood is again downsizing
The trading platform suffers from the reluctance of investors. This is his second wave of job cuts this year.
US online brokerage platform Robinhood is set to lay off 23% of its employees, or more than 750 employees, as interest in the stock market and cryptocurrencies has largely waned due to the boom during the pandemic. “Last year we recruited on the assumption that the appetite for the stock market and cryptos seen in the Covid era would continue in 2022explained boss Vlad Tenev in a letter to employees published on the company’s blog.
The California-based company had already laid off around 9% of its workforce at the end of April after the number of active users fell by 8% between the third and fourth quarters of 2021. It also said it would focus on cost control. “It wasn’t enough‘ Vlad Tenev notes in his letter to the ‘Robin Hoodies” (She “Robinhoodians», pun between Robin Hood and «Hooded Pulloverwhat hoodie means). “Since then, we have seen the macroeconomic environment deteriorate even further, with inflation at a 40-year high accompanied by a crypto market crash.‘ he elaborates. “This further reduced our customer base and assets under our control.»
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The platform, which went public a year ago, retains around 2,600 employees after laying off about 1,100 people in total. This second wave of layoffs affects all trades, but above all operations and marketing, said the boss. According to its quarterly earnings release on Tuesday, the service had about 15 million monthly active users at the end of June, down 28% year-on-year. Sales plummeted 44% within a year. In light of the cryptocurrency crisis, several investment platforms specializing in these volatile currencies have recently filed for bankruptcy.
And more generally, given the unfavorable economic environment, many technology companies have slowed the pace of hiring or firing. Shopify, an online selling platform, announced last week that it was laying off 10% of its employees, or about 1,000 employees, because the mass adoption of e-commerce during lockdown didn’t result in such a big habit change faster than hoped.
A $30 million fine
Although short, Robinhood’s history has already been marked by several controversies. Its founders have reiterated that they wantDemocratize access to finance‘ but their economic model is worrying given that the platform funds the lack of commissions by subcontracting their large volumes of orders to intermediaries who remunerate them. A legal practice, but opaque and potentially a source of conflicts of interest. On Monday, a New York financial services regulator fined its cryptocurrency business $30 million for violating money laundering and cybersecurity laws.
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“We have made significant progress implementing cybersecurity and regulatory compliance programs, and we will continue to prioritize this work for the benefit of our customers.“Responded Cheryl Crumpton, a Robinhood attorney who was contacted by AFP. “We continue to pride ourselves on offering a more accessible and affordable platform to buy and sell crypto“, she added.
Robinhood rose to global prominence in January 2021 during the GameStop saga, in which thousands of small shareholders drove the shares of this chain of video game stores from $17 to nearly $500 in a matter of days. Unable to keep up with the flow of orders, Robinhood had to block certain transactions at the risk of imploding itself, drawing the ire of many stockbrokers. The company’s stock has lost half of its value since the beginning of the year.
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