Robinhood employees describe strengthening the belt before job cuts

  • Robinhood laid off 23% of its staff on Tuesday after a first round of job cuts in April.
  • Former employees say they have seen recent signs of belt tightening, including plans to reduce office space.
  • In a quarterly earnings call, Robinhood executives said the company will not be acquired but is considering acquisitions.

It has been a tough week for Robinhood.

On Tuesday, Robinhood was slapped with a $ 30 million fine from the New York State financial regulator. Later that day, the company announced plans to cut nearly a quarter of its workforce of approximately 3,500 employees and reported lackluster earnings in the second quarter. On Wednesday, a senior executive, Chief Product Officer Aparna Chennapragada, announced his departure from the company.

While the second round of job cuts came as a shock to some, following a 9% reduction in the workforce just four months earlier, insiders say they have seen the signs.

For Robinhood employees, the disappointing financial data – for example, average monthly users fell by a third from 2021 – wasn’t surprising. Nor were the layoffs themselves, which had been the key topic of rumors about the company since this spring. That’s because in recent weeks the startup has been sending out warning signs of tough times coming, from managers’ emails about an upcoming reorganization to the sight of potential tenants from other companies touring Robinhood’s offices.

Now, morale among the remaining 2,600 employees is bleak. And the questions about the future of the company, from both professionals and industry players, are burning more than ever. Insider spoke to five former Robinhood employees, who they asked to remain anonymous to protect their future job opportunities. They described a company, a year after its public debut, facing a slowing market and looking for all ways to cut costs and an uncertain workforce with no clear vision of when the downsizing might end.

“The company is bleeding money, and that’s bad,” said one former employee, sharing his opinion on the company’s publicly reported quarterly financials. “I believe in the mission itself, but people can’t trust us at GameStop,” they said.

A Robinhood spokesperson declined to comment.

The layoffs

Axed Robinhood employees were surprised at the scale of Tuesday’s job cuts, which impacted 23% of the company’s workforce, or around 800 employees. The layoffs, which are expected to cost Robinhood up to $ 60 million in benefits and expenses, hit the marketing, operations and customer service divisions the hardest, with two offices closed in Tempe, Arizona, and Charlotte, Carolina. North.

In a blog post announcing the cuts, Robinhood CEO and cofounder Vlad Tenev wrote that the blame for the drastic downsizing was all his own.

“As CEO, I have approved and taken responsibility for our ambitious staffing trajectory – this is about me,” Tenev wrote, referring to staff members as “Robinhoodies” and “Hoodies”.

According to former employees, Tenev announced the layoffs on Tuesday in a short five- to 10-minute Zoom call with Robinhood’s workforce. He also announced the closure of offices in Tempe and Charlotte, and then echoed the message from Robinhood’s public blog post: The startup added staff too quickly and was not prepared for further economic weakness.

After the Zoom call ended, the employees waited anxiously to see if they would be let go; Tenev said the staff would be notified via email and Slack immediately after the call.

“We’ve all started exchanging contact information and phone numbers,” said one former employee. “After the announcement, we all sat there refreshing our screens over and over to see if we were the one who got the notification. The whole company froze for those 15 minutes waiting to see what happened to them.” .

While Tenev’s blog post stated that sacked Robinhood staff would be offered the opportunity to stay with the company until October, some former employees said they lost access to Robinhood’s systems after Tuesday’s call. and to no longer work for the company. It’s an understandable move, they added, given the brokerage access to sensitive customer information.

Morale that collapses

Robinhood morale has been declining since the company laid off 9% of its employees in April, staff members said.

“That was a ‘Come to Earth’ moment for us,” said one newly fired employee. “For many people we lived in a fantastic land”.

“People just weren’t the same, morale was low if you went to the office,” said one of the fired employees. “I know morale is going to be really low this time. The people who are still there are like, ‘What the hell are we supposed to do now?'”

The employee added that in the weeks leading up to Tuesday’s mass layoffs, they had heard from their direct manager of a potential reorganization of their team. It was an invitation, this person said, to start applying for other jobs.

Another omen came in the weeks leading up to the layoffs, when former employees saw representatives from other companies touring the Charlotte office, which Robinhood had opened in 2021, to potentially occupy the space, they said.

“My mind has gone to one of two things: they’re either getting rid of Charlotte’s office or they’re just moving us to a smaller office,” said a former Charlotte employee who used to work in customer service. “There was no communication about it, like ‘Hey, people might come and have a look around the office, don’t worry.’ They were walking around the office, getting water from our snack station, it was really very strange. ”

Other former Robinhood staff members said the company had informed them in recent weeks that it planned to reduce its footprint in the building from two floors to one, which they too found worrying.

In Arizona, meanwhile, a former employee based there who left the company in recent months told Insider that Robinhood was looking to cut his footprint on a WeWork in downtown Tempe that opened in 2020.

With the company returning to the office continually rejected and only a handful of people walking into the office, “having an entire floor in what used to be an expensive building, they were probably bleeding money,” the former Arizona-based employee said. . The employee estimated that around 200 Robinhood staff members were likely based in the Tempe office.

Uncertainty ahead

In his blog on Tuesday, Tenev said that “the further deterioration of the macro environment” following the layoffs in April had left the brokerage in a weaker position than he had estimated.

But the economy hasn’t shown many signs of abating, and as Chief Financial Officer Jason Warnick pointed out during the company’s second quarter earnings call: “The first half of the year was the worst we’ve seen in about. 50 years, difficult to know exactly when it will hit rock bottom and reverse. ”

“We’ve seen Vlad talk about how this was a product of the macro environment. Interest rates on the rise, all that stuff, but not much has changed since April until now,” said Charlotte’s former employee. “The company didn’t feel in a better position than before, so it seemed inevitable from that point of view,” they said of the layoffs.

On Wednesday, Chennapragada, the company’s chief product officer, announced on LinkedIn and Twitter that she would step down but remain a consultant to Tenev. Chennapragada, a former Google executive, joined Robinhood more than a year ago in April 2021.

“The world has changed. As Robinhood adjusts to this new context, it is time for me to move on,” she wrote in her post.

Meanwhile, Tenev was curiously optimistic about Robinhood’s earnings call on Wednesday. Asked if the company was in the process of being acquired – another rumor that has been circulating since cryptocurrency exchange FTX’s Sam Bankman-Fried took a 7.6% stake in the fintech investment firm – Tenev said no. , but that Robinhood himself was looking to make more acquisitions.

In April, weeks before the 9% reduction in the workforce, Robinhood announced the acquisition of cryptocurrency firm Ziglu. Robinhood has about $ 6 billion in cash in its balance sheet and the company has a $ 2.5 billion acquisition budget, Warnick said during the earnings call.

Robinhood stock peaked at over $ 80 per share days after going public last summer. The stock has since fallen more than 80% to around $ 10. After the latest layoff announcement, Robinhood’s stock jumped 15% on Wednesday morning and then rose sharply on Thursday morning.

Are you an employee or former employee of Robinhood? Get in touch with our journalists: Asia Martino, Carter JohnsonAnd Bianca Chan.

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