Trading app Robinhood cuts nearly a quarter of its staff
LEILA FADEL, HOST:
Remember Robinhood? It's the company that made a trading app so popular that it became a pandemic phenomenon. Today, that same company is reeling. Its earnings have eroded. And this week, Robinhood announced another round of sweeping layoffs. NPR's David Gura looks at what went wrong.
DAVID GURA, BYLINE: Trading stocks has traditionally been a boring business. That is until Robinhood came along. The company made it exciting and free to buy and sell stocks. During the pandemic, as markets set new records, the Robinhood app became wildly popular.
Terrance Odean is a finance professor at the University of California, Berkeley.
TERRANCE ODEAN: There were people sitting at home, comfortable with technology, not much to do and enough money to play with. And many of them decided to play on Robinhood.
GURA: Odean was one of them who remembers how, when he first used the app to trade, his smartphone screen filled with virtual confetti. Robinhood grew fast, and its IPO on the Nasdaq was a high-profile event.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON: They're getting ready to open Robinhood. They're going to get the first trade here. Indicated still at the offer price of $38 - going to have a valuation of about $32 billion.
GURA: But today, it's a completely different story. Markets have really taken a hit. So far this year, the Nasdaq is down by about 20%. And Robinhood is trying to survive in a difficult environment.
Reena Aggarwal teaches finance at Georgetown.
REENA AGGARWAL: So the demand that was there two years ago doesn't exist at the same level anymore.
GURA: This week, Robinhood, which needs its users to be buying and selling stock regularly, said it had 7 million fewer active users in June than a year before. Now, one reason is the lockdowns are over, and people don't have the time they used to to trade. But according to Aggarwal, this goes beyond that.
AGGARWAL: The markets have become much more volatile, much more choppy. They're not just going up. And that has made retail investors nervous.
GURA: And Robinhood's CEO was forced to pivot this week. He cut a quarter of the company's staff. Robinhood faces other problems, including scrutiny from regulators. And investors are losing patience with the company. In the year or so since Robinhood went public, its share price is down more than 70%.
David Gura, NPR News, New York.
(SOUNDBITE OF HERBIE HANCOCK'S "MAIDEN VOYAGE") Transcript provided by NPR, Copyright NPR.