Economic, stock market and economic news of August 2, 2022
Robinhood, the trading app that popularized one-click trading and helped fuel last year’s meme trading frenzy, said on Tuesday it was laying off about 23% of its workforce.
Vlad Tenev, Robinhood’s chief executive, said in a blog post that the layoffs would affect the company’s employees, especially those in operations, marketing and program management positions.
Robinhood declined to comment on the layoffs.
The announcement closely followed cuts in April, when Robinhood laid off 340 workers, or about 9% of its employees at the time. Since then, Mr. Tenev wrote, further worsening of the economy, including inflation and the crypto market crash, has “reduced client trading activity and assets under custody.” The price of Bitcoin has more than halved this year, to around $23,000 per coin. The cryptocurrency reached $66,000 at the end of 2021.
The layoffs are part of a wave of job cuts at tech companies, including some cryptocurrency firms. In June, cryptocurrency exchanges including Coinbase and Gemini announced they were laying off employees. Last week, Shopify, an online marketplace, announced it was cutting 10% of its 10,000 employees.
In his Tuesday memo, Tenev said Robinhood misjudged the economy and business activity. “As CEO, I have endorsed and taken responsibility for our ambitious staffing trajectory – it’s on me,” he wrote.
The company also released its second-quarter results on Tuesday, saying its monthly active user count fell to 14 million in June, down from 1.9 million.
The turbulence represents a major setback for Robinhood, which became a key player in the stock craze even in early 2021, when investors coalesced to drive up shares of companies such as video game retailer GameStop. and the AMC movie theater chain. On January 27, 2021, GameStop shares closed nearly 1,800% from a few weeks prior, a record high. Next, Robinhood restricted the trading of certain meme stocks. The restrictions sent stocks plunging. Lawsuits, a Securities and Exchange Commission investigation, and congressional hearings soon followed.
Robinhood’s stock price soared during meme stock trading. On August 7, 2021, the company was worth $46 billion, up about 60% from its valuation the previous week. But its stock has plunged 50% since the start of the year as it continues to deal with the fallout.
The layoffs come at a difficult time for fintech companies.
Coinbase, the publicly traded cryptocurrency exchange, laid off 18% of its staff in June amid the crypto market crash. Other big crypto companies, like OpenSea, Gemini, and Crypto.com, have also made job cuts.
“Everyone over-hired – Coinbase over-hired, Robinhood over-hired. When the money was easy, they just hired, hired, hired,” said Dan Dolev, principal analyst at Mizuho. “I’m not surprised to see these cuts.”
The overall value of the cryptocurrency market fell to around $1 trillion from $3 trillion last year, when enthusiasm for crypto trading peaked and the price of Bitcoin hit a new high. .
Robinhood has been pushing hard to grow its crypto arm this year, listing new coins and rolling out a crypto wallet product. “The thing I liked least about Robinhood is their exposure to crypto,” Dolev said. “Anything that has no intrinsic value is always subject to trouble.”
Also on Tuesday, the New York State Department of Financial Services announced it was fining crypto operation Robinhood $30 million for violating its anti-money laundering regulations. money and cybersecurity.
“As its business has grown, Robinhood Crypto has failed to invest the appropriate resources and attention to develop and maintain a culture of compliance,” Adrienne A. Harris, Superintendent of Financial Services, said in a statement. communicated.
Cheryl Crumpton, associate general counsel at Robinhood, said in a statement that the company is “delighted” the settlement has been finalized. “We have made significant progress in building industry-leading legal, compliance and cybersecurity programs, and we will continue to prioritize this work to better serve our customers,” he said. she stated.