The trends in the tech sector are becoming more entrenched. Today, Helbiz (NASDAQ:HLBZ) is the latest company to announce a significant round of layoffs. However, the Helbiz layoffs have done little to help the HLBZ stock price, which is in the red this afternoon.
Helbiz’s management team is reportedly looking at cutting around 15% of its overall workforce. These reductions will take place across the U.S. and Europe and are expected to begin within the next few days.
While many of the company’s tech peers have seen positive reactions to such moves, there appear to be more reasons why the market’s reaction is mixed for Helbiz today. One of the key complicating factors for the company is an additional announcement that it may be looking to spin off and separate its media business. The goal of this move would be to streamline the company’s focus on its core mobility business.
Let’s dive into what investors should make of these big moves.
Are Helbiz Layoffs a Net Positive for the Company?
Like many other growth-oriented tech companies, these layoffs signal that overly enthusiastic hiring practices may be coming to an end. With the economy likely to slow, companies like Helbiz are taking their foot off the gas. Today, profitability is becoming more important to investors than top-line growth. That also means investors may view the expected 20% to 30% cut to Helbiz’s monthly cash burn rate more positively than any corresponding drop in top-line growth.
Accordingly, the Helbiz layoffs are indeed a net positive for the company. So, why is the stock down considerably today?
Well, Helbiz’s announcement that it intends to shop its media business is probably driving concern among some investors. This media business initially garnered significant attention for its long-term profitability potential. While Helbiz is certainly a mobility-focused company, many viewed its tech piece as the key to long-haul viability. Thus, many investors may not see a reason to hold HLBZ stock following the news.
Profitable growth is harder to come by these days and the path forward for Helbiz remains unclear. Although the company is getting slimmer, whether these recent moves will culminate in the desired end result remains to be seen.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.