Welcome back to closing bell on cheddar news will retail
brokerage giant Robin Hood letting go of about 9% of
its staff after rapid expansion last year? Thanks to
the meme stock phrase in january of last year and
the rise of retail investing? Well, the company
is now having to reassess as it faces multiple headwinds
, including declining crypto revenue and an inability to regain
prior traction. The ceo of Latina of writing in
a blog post yesterday, yesterday afternoon the quote,
the rapid headcount growth has led to some duplicate roles
and job functions. We determined that making these reductions
to Robin Hood staff is the right decision to improve
efficiency, increase our velocity and ensure that were responsive
to the changing needs of our customers. End quote
. Well shares of Robin Hood reaching a new load
today that stock down down 5.5% over the past two
days after yesterday's announcement. And joining me now to
discuss is Caleb silver editor in chief at investopedia,
a financial education website. Caleb it's good to see
you. So is this an expected growing pain for
a firm that did see explosive growth in such a
short period of time? Yeah, I think it's
worse than that. The stock is down some 72%
since the I. P. O. And it
really hasn't done much uh you know, since it
went public, there was a little bit of excitement
around that. But yeah it grew really fast.
It had went from 700 employees to 3800 employees in
just last year in 2021 because of that growth.
10 million new traders and customers joining up with Robin
Hood. But guess what? They're not trading that
much. And how does Robin Hood make money in
crypto and in options? And we've seen a lot
of reduced activity in both of those areas and the
average account balance for its customers is super low.
It's something like$240. So there's not a lot
of turning, there's not a lot of trading going
on and the people that are trading don't have a
lot of money in their accounts. Any indication Caleb
as to how this might change the user experience if
9% of the staff is shed according to Robin Hood
, will the user notice a difference? I don't
think so. I think you're gonna see a little
bit more automation, but that's how Robin Hood was
built. I think what you'll see is less marketing
. I think that's where the duplicative efforts were to
get new customers less sales to get new customers and
more focused on trying to get more out of those
existing accounts because folks by and large that have Robin
Hood accounts don't do a lot of trading, don't
have very large balances. And the areas where Robin
Hood makes money again, crypto and, and uh
, and in options, they're just not very hot
right now. Bear market will do that in tech
stocks, but also a big crash and a lot
of the cryptocurrencies will do that as well. So
a lot of enthusiasm is gone. All platforms are
facing these growing pains to a degree, It's just
much worse for Robin Hood because it had that explosive
growth when the market was hot and when mean stocks
were everything, we just don't have that kind of
activity right now. So let's talk more about Robin
Hood isn't mostly a retail investor who's on this platform
versus let's say a Fidelity at Charles, Schwab or
Td Ameritrade. Absolutely. And you could just tell
by the account side they're not offering four oh one
K plans just yet. They're going to probably get
into some other financial products. They wanted to become
a platform that offered everything, starting with that free
trading and then expanding out. But I'm gonna,
I'm sure they're gonna have to reduce a lot of
those expectations for growth and where they were going to
grow their business just to focus on what they do
and what they do well, but the market cap
currency down to$9 billion.08 or$9 billion they look
like an acquisition target to me, I'm not saying
that I know anything about this, but they're looking
awful cheap and when you think about what's going on
with twitter and some of these other platforms, you
can see a buyer coming from Robin Hood any any
minute now, right? I'm thinking of Activision blizzard
as well. Of course Microsoft capitalizing on that.
Clearly Elon musk with twitter, I will wait to
see on Robin Hood Caleb, we don't know of
course if any country, if any companies are actually
interested in Robin Hood, but what might be a
natural fit, would it be another brokerage or you
think another financial services company? Yeah, you could
go that route with another financial services company. Look
at morgan Stanley and ETrade obviously Schwab and Ameritrade obviously
teaming up two giants right there. But you could
also see this fitting potentially into a different type of
a platform. Even an apple there I say,
or or another company that has a lot of customer
penetration and engagement fits kind of nicely into there.
If you're trying to circle the world to have the
financial services part, the trading part and then everything
else in your life running through one device, you
could see something like that happening or it could be
a player out of nowhere or out of europe or
Asia coming in with a lot of money right now
and saying this looks awful cheap. We want all
those customers, the market's gonna rebound eventually. It's
worth it. So it's interesting. Um, it
sounds like at least what we know that there aren't
gonna be any major changes to the user experience if
you're using Robin Hood to make your investments or trade
, you can still do that, but any indication
Caleb where these job cuts will be coming from inside
the company. Yeah, they didn't specify. But
you can imagine when they ramped up, what were
they trying to do? More customer support, more
tech support and more marketing to get even more customers
in and take advantage of that big wave. So
that's probably where those cuts were. Vlad was not
specific in that blog post. I'm sure we'll find
out on their earnings call on Thursday. There'll be
a lot of questions about that. There'll be a
lot of questions about the plan to go forward because
robin has lost about$2 billion dollars since it went
public. Right? Revenue is going to fall off
a cliff as his customer engagement, user engagement.
Daily Active users and the amount of revenue per user
all that's just gonna keep cascading until there's some rebound
and active activity and excitement in the stock market and
the meme stocks. Again, that's going to be
the case. All right, Caleb, silver,
editor in chief at investopedia. Caleb. Always good
to get your insight. Thank you