Robinhood Markets Inc. is closing its offices and laying off at least 25 percent of its workforce. The public company was punished after its Initial Public Offering in July last year.
The app-based broking firm eliminated 780 employees, roughly 23% of its total staff strength. It also announced a top executive departure on Tuesday. In a statement, Chief executive Officer Vlad Tenev said the downsizing was limited to marketing, operations, and program management functions.
The pandemic fueled the boom in trading, and the stock frenzy for meme shares drove stocks of companies like GameStop Corp. and others. This allowed Robinhood markets to tap the IPO market in July 2021. Post the pandemic, appl users declined, share prices cratered, and the business of rainbow slumped.
CEO takes the flak
CEO Tenev said what he saw in 2010 and 2021; he similarly anticipated a longer rally in the market. However, it did not last long enough, so the buck stopped at him at a conference call with journalists. He said that the company overhired certain support functions.
The new move follows an earlier job cut in April this year. The company had reduced headcount by eliminating around 9% of its total staff strength. The total number of staff dismissed in the two rounds now is more than 1000.
In a separate filing on Tuesday, Robinhood said it was closing two offices, and its ChiefProduct Officer, Aparna Chennapragada, was leaving the firm. The company will incur about $30 million to $40 million towards severance costs. Another $10 million to $ 20 Million will be towards office closures, according to details given in the filing.
New business Model
The company is moving towards a new business model where General Managers will be accountable for parts of the business. This will get rid of hierarchies as per the statement issued by Tenev.
Tenev founded Robinhood Markets in 2013 and his Stanford University roommate Baijiu Bhatt. He informed us that employees would be updated on their status via slack message. Those employees who are to leave will be allowed to stay with the company till Oct 1.
Robinhood reported its second-quarter results ahead of schedule. It reported a net loss of $295 million or 34 cents a share. Net revenue declined 44% from the previous year to $318 million.
The shares of Robinhood have lost more than three-quarters of their market capitalization since its IPO. It slid to $9.09, down by 1.5% in extended trading in New York.
