The Blubber

Tl;dr:

• Tech layoffs have an impact on stock price.
• Flow might dictate some directional movement after announcement

2022 Tech Layoffs have been a hard hit to the job market the last few months, with upwards of 120,000 people being relieved from their duties in the process.

Layoffs can mean a lot of different things for a company, and can come from several different avenues. Economic conditions, poor estimated guidance, bad earnings reports, competition, internal pivots with departments, and many other reasons are all attributed to retaining company profits.

Regardless of the reasons, the layoff cycle has been quite devastating. Being said, these layoffs have a direct relation to said company’s stock price, and most investors probably see the layoffs as one of two things: Increased cashflow from current levels, or decreased cashflow in the future. In turn, this affects the share price directly regarding how investors position for such a move.

Some of these companies, such as Amazon (AMZN) and Facebook/Meta (META), have laid off large amounts of employees (pushing 10,000) each. Other organizations such as Peloton (PTON) have laid off half their staff in a large-scale restructuring event.

It’s hard to gauge the effects of a layoff on a company, much less a stock, but thankfully we have data and can see how it’s performed over time.

Data in question contains layoff dates from listed, publicly traded companies. but how does that affect trading around them?

Let’s dive in.

The general movement is a surge after the layoff reports, followed by quite a drastic drop over the next couple of days. Great! Looks like there's something to be garnered from here. The next question becomes: Do we see an increase in activity because of these movements?

One thing to note: A lot of these movements have come from the news and a mixture of market conditions, since these layoffs are only covering a 2.5 month period.

Volume during the period peaks 3 days post layoff, approximately when the downturn happens 2 days in. Volume does, however, peak at the top of the rally.

Though this is the average, we cannot guarantee this works. There may be large outliers, and there were from this dataset that we had to remove (OPEN, RDFN, and a couple of others) as they both posted layoff numbers and rallied as much as 80% so it delivered quite a skew on the data.

So, how do these numbers stack up individually?

You can take a look at the data yourself below. The general trend observed above is seen, but there are a few heavy gainers (and losers) that skew it.

With Upstart (UPST) layoff date being November 1st, we can look at flow from 10/28 - 11/04 to see how whales were positioned. The flow was heavily put leaning, with 60% bearish put premiums and 55% bearish premium being traded, along with quite a high put/call ratio.

Heading over to the Unusual Whales charting feature, we can examine some key dates. Upstart announced layoffs on 11/1, which promptly triggered a week long selloff headed into earnings. The heavy put side flow was reflective of the share price falling from $25 per share to a low of $17.50 before earnings triggered a reversal.

With Unusual Whales, you can catch some of these moves in real time with the Unusual Whales news flow, or by following us on Twitter.

For a full breakdown of all the values in the charts, see the image below detailing the percentage movements from the date.

NOTE: These are not % changes from each day, but rather % changes from when the layoffs happened.

Thank you for reading, we hope you learned something new today!