- Robinhood (HOOD) released earnings a day earlier with revenue down 44% and a loss of $295 million for the second quarter.
- 23% staff reduction focused on operations, marketing and program management.
- Crypto entity penalized USD30 million from the New York regulator.
- Shares down 3% in extended trading.
What is earnings season and what to look for in earnings reports
Robinhood Markets Inc. (HOOD) is shedding nearly a quarter of its workforce and closing offices after a tough first year as a public company. Who could forget the inspiring story of college roommates who wanted to revolutionize stock trading, especially for the masses? At the time of its IPO last summer, Robinhood was (HOOD) boasted that 50 percent of retail accounts opened in the US from 2016-21 were on its platform. However, the curfew and the stimulus–The fueled trading boom has lost steam, and shares of Robinhood are down 50 percent year-to-date.
The app-based brokerage reported second-quarter results a day ahead of schedule and said net loss for the period USD295 million, or 34 cents a share. Net sales plummeted 44% year over year USD318 million.Active users on the platform have dropped by almost 2 million until 14 million in the second quarter of 2022. During the quarter, the brokerage firm added just 100,000 funded accounts, Accounts with Cash Deposits during assets under custody plunged 31 percent USD64.2 billion sequentially, after a sharp sell-off in technology stocks and cryptocurrencies popular with Robinhood clients.
Adding to its woes, the cryptocurrency arm of Robinhood Markets Inc. has been fined $30 million by New York City’s Financial Services Commission after the brokerage firm was accused of violating anti-money laundering and anti-cybersecurity regulations. According to an order filed on Tuesday, the unit must hire an independent consultant to monitor compliance. The company announced last year that it expects to pay the fine.
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Second round of job cuts this year
The company announced in a blog post on Tuesday that it will cut its headcount by 23 percent, or about 780 employees, as part of a restructuring that would also result in the closure of two of its offices. Among the notable departures, Chief Product Officer Aparna Chennapragada is leaving to join the company USD$30 million to $40 million in severance and benefit fees and USD15 million to USD20 million tied to the office closures, according to filing. “Today we are parting ways with many incredibly talented people in an extremely challenging macro environment,” wrote Vlad Tenev, co-founder of Robinhood.
The announcement marked the latest round of layoffs for the seven-year-old brokerage firm, which announced in April it would shed 9 percent of its full-time staff. Robinhood said employees who have lost their jobs have the option to stay until October 1 and there are no further plans to reduce headcount.
Merger and Acquisition Discussion
The brokerage firm’s poor performance, coupled with a huge drop in its share price since it hit highs of around $85 last year, has led to suggestions that it could be acquired. In April, billionaire crypto exchange FTX founder Sam Bankman-Fried took a 7.6% stake in the company, valued at $648 million. According to FTX, no formal M&A talks have been held. Jason Warnick, CFO of Robinhood, dismissed the idea that Robinhood would be interested in a merger with another company: “As opposed to an acquisition, we think we should look more aggressively at acquiring other companies.”
Robinhood Markets Inc. 4H chart as of August 3, 2022
Source: TradingView created by Zain Vawda
Technically, we appear to have found a bottom around $6.82 on June 16 before recovering to the upside. From a 4-hour perspective, we appear bullish as we continue to make higher highs and higher lows considering the technical structure. We broke above and tested again 100 SMA on the 4H chart with more upside potential. Yesterday’s announcement did not and should not change the 4H structure the If the price stays above the 4-hour swing low, we could see $10-10.20 in the near-term, which coincides with the 100-SMA on the daily chart.
Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda