Robinhood is implementing job cuts, restructuring teams, and placing a heightened emphasis on credit cards in response to a diminishing user base, according to insiders.
Key takeaways about Robinhood's strategic overhaul:
- Robinhood implementing job cuts, restructuring teams, and focusing on credit cards
- Acquired X1, a no-fee credit card startup, for $95 million in June
- Strategic shift toward credit cards due to declining user base
- Integrating X1 with Robinhood Money arm for cash management and spending features
- Credit cards offer higher profit margins and less market volatility compared to stock trading
- Internal adjustments post-acquisition resulted in minimal staff reduction among 60 new employees
- The company still actively hiring with 200 open positions
- Decline of 400,000 monthly active users from July to August, leaving 10.6 million users
- X1 is seen as Robinhood's attempt to address the user base decline
- The future of X1 discussed in a recent all-employee meeting
In June, Robinhood unveiled its intention to acquire X1, a no-fee credit card startup, for a sum of $95 million. Insiders reveal that the company's strategic focus is now centered on credit cards as a means to address its declining user base. Concurrently, the company has been executing staff layoffs and reorganizing internal teams in line with this strategic pivot.
Robinhood's move towards credit cards gained momentum with its X1 acquisition. The company intends to integrate X1 with its Robinhood Money arm, a subsidiary that concentrates on cash management and spending features within the app, such as its debit card, direct deposit, and peer-to-peer payments. Credit cards offer significantly higher profit margins than stock trading and are generally less susceptible to market volatility.
Following the acquisition, a Robinhood spokesperson confirmed that internal adjustments had been made, resulting in a minimal reduction in staff among the 60 employees who joined Robinhood as a result of the acquisition. The spokesperson also stated that the company is still actively hiring, with 200 open positions available.
These changes come as Robinhood grapples with a diminishing user base. The company reported a decline of 400,000 monthly active users, from July to August, leaving them with 10.6 million active users.
"This has prompted some concern among our executive leadership," noted one insider, who emphasized that X1 represents Robinhood's "latest attempt to break free from this downturn."
The future of X1 and Robinhood's involvement in the credit card realm was a central topic of discussion during the company's most recent all-employee meeting.
In June, Robinhood conducted layoffs affecting 150 full-time employees across three divisions, as detailed in an internal memo seen by Insider. These divisions included customer experience and platform shared services, customer trust and safety, and safety and productivity. Although the initial layoff garnered widespread attention, subsequent insights reveal that further staff cuts have been made, as evidenced by audio recordings of an all-hands meeting reviewed by Insider.
The timeline for the company's most recent job cuts remains unclear. Reports in a private group for individuals with Robinhood.com email addresses on the tech-industry chat app Blind indicate that layoffs have continued as recently as Thursday, based on screenshots viewed by Insider.
Following the release of Robinhood's monthly metrics report for August, JPMorgan analysts noted that the company's performance "appears to confirm that retail activity tends to decrease during weaker market conditions, with both client engagement and returns showing declines in August." However, the analysts also observed that August is generally characterized by reduced user engagement across the board.
Based in Menlo Park, California, Robinhood has been diversifying its business ventures over the past couple of years. In 2021, it acquired Say Technologies for $140 million, a move that strengthened connections between companies and retail shareholders.
Robinhood's CEO and co-founder, Vlad Tenev, shared insights into the company's evolving mission during an event hosted by TechCrunch. While Robinhood initially focused on trading and investing, Tenev stated that the company now aims to address a broader range of financial needs, including assisting users in saving for retirement and building emergency funds.
On Thursday, Robinhood's stock registered a nearly 4% decline, mirroring a broader drop in the S&P 500, which fell by nearly 2%. Since its stock market debut two years ago, Robinhood's stock has experienced a 72% decline.
By: Ashley Stewart & Rebecca Ungarino
September 21, 2023
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