Salem Radio Network News Tuesday, August 16, 2022

Science

Robinhood shares jump after brokerage cuts jobs, posts smaller-than-feared loss

By Manya Saini and Hannah Lang

(Reuters) -Shares of Robinhood Markets rose more than 12% on Wednesday, a day after the commission-free brokerage announced job cuts and posted a smaller-than-expected quarterly loss in an earnings announcement that came a day earlier than scheduled.

The Menlo Park, California-based company saw revenue fall 44% in the second quarter ended June 30 as trading volumes eased from last year’s frenetic pace when retail investors used its application to pump money into so-called ‘meme stocks’.

However, investors took note of Robinhood’s announcement via a blog post that it would commence another round of layoffs affecting 780 employees, on top of the 9% of full-time staff laid off earlier this year, and would change its organizational structure to drive greater cost discipline.

“We believe these cost reductions will likely drive the company to profitability in the near term and could drive shares higher,” Goldman Sachs analysts wrote in a note.

Fintech stocks including Robinhood bore the brunt of a broader market decline as a risk-off environment coupled with higher funding costs and sluggish e-commerce growth led traders to pull back from high-growth tech so far this year.

Shares of Robinhood, which were sold at $38 a share in its initial public offering last year, have shed more than 70% since the company’s debut on the NASDAQ.

Common with other high-growth tech firms, Robinhood has yet to turn a profit since its market debut, although some analysts took Tuesday’s announcement as a positive sign that the company is on an upward trajectory.

“We believe that once the market digests the ‘shock’ from the layoff’s sheer size, investors will shift focus to fundamentals and path to profitability,” Mizuho analysts said in a Tuesday research note.

Robinhood is one of many fintech upstarts that have started slashing jobs ahead of an expected recession, along with crypto exchange Coinbase Global Inc, buy-now-pay-later company Klarna and NFT platform OpenSea.

(Reporting by Manya Saini in Bengaluru and Hannah Lang in Washington; Editing by Shinjini Ganguli)

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