Shares of Robinhood soar as the trading app reveals mass layoffs

Shares of Robinhood Markets were up more than 12% on Wednesday, a day after the no-fee brokerage firm announced job cuts and posted a lower-than-expected quarterly loss in an earnings announcement the day before.

The Menlo Park, California-based company experienced a 44% decline in revenue in the second quarter ended June 30, as trading volumes fell from last year’s dizzying pace when retail investors used his application to inject money into so-called “meme shares”.

However, investors took notice of Robinhood’s announcement via a blog post that it would initiate another round of layoffs affecting 780 employees, as well as 9% of full-time staff laid off earlier this year, and has changed its organizational structure to increase discipline costs.

“We believe these cost cuts are likely to lead the company to short-term profitability and could drive stocks up,” Goldman Sachs analysts wrote in a statement.

Robinhood said it will cut its total workforce by 23% amid a looming recession.

Fintech stocks, including Robinhood, have suffered the brunt of a broader market decline as a risky environment, coupled with higher financing costs and slow growth in e-commerce, has led traders to withdraw from high tech growth so far this year.

Shares of Robinhood, which sold for $ 38 per share when it went public last year, have fallen more than 70% since the company debuted on Nasdaq.

Like other high-growth tech companies, Robinhood has not yet made a profit since its market debut, though some analysts saw Tuesday’s announcement as a positive sign that the company is on an upward trajectory.

“We believe that once the market has digested the ‘shock’ of the size of the layoff, investors will focus on fundamentals and the path to profitability,” Mizuho analysts said in a research note Tuesday.

Robinhood is one of several fintech startups that started losing jobs before an expected recession, along with cryptocurrency exchange Coinbase Global, buy-it-now firm Klarna, and NFT platform OpenSea.

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