Robinhood, the popular trading platform, is reportedly facing challenges with a shrinking user base and has announced layoffs and reorganization efforts. The company recently acquired no-fee credit card startup X1 for $95 million and plans to merge it with its Robinhood Money organization, which focuses on cash management and spending features of the app.
The decision to shift focus towards credit cards is seen as a strategic move to mitigate the impact of a shrinking user base. Credit cards generally offer higher profit margins compared to stock trading and are less affected by market volatility. This move is said to be part of Robinhood's efforts to diversify its offerings and address the declining user numbers.
A spokesperson from Robinhood confirmed that internal changes were made as a result of the acquisition and that a small number of employees were laid off. However, the company is still actively hiring and currently has 200 open roles.
The declining user base has reportedly caused concern among executive leadership, leading to discussions about the future of credit cards and the recently acquired X1 in a company-wide meeting.
In addition to the recent layoffs, Robinhood had previously laid off 150 full-time employees in three different departments. The exact timing of the most recent job cuts is unclear, but there have been reports of layoffs as recent as Thursday.
Analysts from JPMorgan noted that Robinhood's performance in August showed lower client engagement and returns, reflecting the generally weaker markets during that period. However, it's important to note that August tends to be slower for user engagement overall.
Robinhood, based in Menlo Park, California, has been expanding its business into other areas beyond trading and investing. The company's CEO, Vlad Tenev, has expressed the company's aim to assist customers with a comprehensive set of financial needs, including retirement savings and emergency funds.
The stock market debut of Robinhood two years ago saw a decline of 72% in its stock value, and recently, the company's shares fell nearly 4% in response to broader market trends.
Overall, Robinhood's recent actions, including the acquisition of X1 and the focus on credit cards, demonstrate its efforts to adapt to the changing market conditions and expand its offerings beyond stock trading.