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Retail Stockbroking Darling Robinhood Slashes Jobs

  • In a blogpost Tuesday, Robinhood announced that it was slashing 780 employees, or around 23% of its workforce, closing two if its offices.
  • Trading volumes have declined dramatically, not just for Robinhood, but for markets in general, and the traditionally thin summer trading season has seen liquidity trickle as retail investors head for the beach instead of their Bloomberg terminals.

The pandemic upturned businesses and created winners and losers, one of which was Robinhood Markets (+11.70%), the slick retail stockbroking app that made traders of us all, as legions of bored investors flush with stimulus checks headed to gamble in the markets.

But as effective vaccines and monetary policy tightening have set in against a backdrop of soaring living expenses, retail traders have become an increasingly elusive set, forcing Robinhood to curb its costs by laying off almost a quarter of staff.

In a blogpost Tuesday, the retail trading app that popularized and gamified trading and investment, announced that it was slashing 780 employees, or around 23% of its workforce, closing two if its offices.

During more halcyon days, Robinhood once boasted 50% of retail trading accounts opened in the U.S. from 2016 through 2021, fed off a steady diet of lockdown boredom fueled by stimulus.

But since the Fed’s policy shift, shares of Robinhood have been hammered, falling by over 50% this year alone.

Robinhood’s most recent cut comes on the back of a 9% cut in headcount in April.

To be sure, trading volumes have declined dramatically, not just for Robinhood, but for markets in general, and the traditionally thin summer trading season has seen liquidity trickle as retail investors head for the beach instead of their Bloomberg terminals.

Nevertheless, Robinhood managed to narrow losses this quarter, losing just US$295 million compared with the US$308 million according to analyst forecasts and 41% less than the US$502 million the brokerage lost last year.

Net losses per share was US$0.34, compared with US$2.16 from the same quarter last year, when retail investors were out in full force.

To that end, Robinhood may be positioning itself nicely for when trading conditions improve, especially if it manages to keep costs in check.

With the bulk of revenues coming from payment for order flow, the controversial practice of selling customer trades to market makers, when market volumes eventually pick up, the combination of lower costs and higher revenue should help Robinhood narrow losses and possibly turn a profit eventually.

For now, much of Robinhood’s fortunes lie in the hands of the Fed as cryptocurrencies and tech stocks, the two most popular holdings amongst its customers, are highly sensitive to interest rates, and the central bank shows no signs of letting up on its fight against inflation.

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