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Mass layoffs can typically lead to a company’s stock price drop if it turns the investor sentiment negative.

FAANG Layoffs: Causes & Impact on Stocks

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"FAANG Layoffs: Causes & Impact on Stocks"

Sayan Das

Things you need to know before investing in US Stocks, simplified to a T

<p>
    With layoffs and the tech boom simultaneously vying for headlines, there's always one FAANG company in the news. If you're wondering what FAANG companies are — it's an acronym for Facebook, Amazon, Apple, Netflix and Google.
   </p><h2>
    FAANG Company Layoffs
   </h2><p>
    During the last months of 2022, Amazon and Meta (aka Facebook) fired
    <a href="https://www.livemint.com/technology/tech-news/life-beyond-the-us-technology-layoffs-11669131417521.html">
     10,000 and 11,000
    </a>
    employees. Other data shows that some of the top tech companies in the US (including the FAANG companies) cut around
    <a href="https://www.cnbc.com/2023/01/18/tech-layoffs-microsoft-amazon-meta-others-have-cut-more-than-60000.html">
     70,000 jobs in 2022
    </a>
    . And in 2023, this trend appears to be reappearing, with current estimates at
    <a href="https://news.crunchbase.com/startups/tech-layoffs/">
     1,02,000 jobs
    </a>
    lost.
   </p><h2>
    What Sparked FAANG Layoffs?
   </h2><p>
    Understandably, layoffs in such large numbers caused a stir across the world. The FAANG companies and tech giants in the spotlight quoted recessionary fears and a generally bleak global economic situation as the reasons for these job cuts.
   </p><h2>
    Spoiler: It's Not a Fund Crunch Issue!
   </h2><p>
    However, even as the layoffs were making news on the one hand, many of these tech companies continued to invest in AI and other futuristic software. So, this wasn't a question of limited capital.
    <br>
    As it turned out, the reason behind the layoffs was that most of these FAANG companies had over-hired during the pandemic. The paychecks in the IT sector boomed due to rising tech demand. Once the economic effects of the pandemic wore out, demand crumbled, and personnel requirements had to be recalibrated.
   </p><h2>
    Did FAANG Stock Prices Change after the Layoffs?
   </h2><p>
    Yes &amp; no! Typically, mass layoffs can lead to a drop in a company’s stock price if the investor sentiment turns negative. However, if investors perceive the layoffs as a positive measure, where the company may redirect its savings towards future investments, it could increase stock prices. Anyway, check out how the FAANG company layoffs affected each company’s stock prices.
   </p><h3>
    Facebook
   </h3><p>
    Listed as Meta on the Nasdaq stock exchange, Facebook’s stock price
    <a href="https://markets.businessinsider.com/news/stocks/meta-stock-shares-facebook-layoffs-market-outlook-recession-mark-zuckerberg-2022-11">
     rose by 7.5%
    </a>
    after the company announced its decision to lay off 11,000 employees in November 2022.
   </p><h3>
    Amazon
   </h3><p>
    Amazon announced its decision to lay off around 10,000 people in November 2022. Unlike Meta, Amazon’s stock price
    <a href="https://www.thecoinrepublic.com/2022/12/18/amazon-stock-price-nasdaq-amzn-after-effects-of-amazon-layoffs-jeff-bezos-mentioned/#:~:text=Share,-Join%20Us%20on&amp;text=Amazon%20Stock%20price%20has%20been,200%2Ddays%20Daily%20Moving%20Average.">
     dropped consistently
    </a>
    following these job cuts in its Alexa division.
   </p><h3>
    Apple
   </h3><p>
    Apple is an anomaly on this list because it is one of the few big companies that hasn’t laid off employees. Instead, the company has merely paused hiring for various roles temporarily.
   </p><h3>
    Netflix
   </h3><p>
    Netflix laid off a total of 450 employees by June 2022. These job cuts occurred amidst declining stock prices, with the company’s stock decreasing by
    <a href="https://finance.yahoo.com/news/netflix-lays-off-another-300-employees-amid-sagging-stock-price-slower-revenue-growth-170455996.html">
     around 70%
    </a>
    yearly.
   </p><h3>
    Google
   </h3><p>
    Google, listed as Alphabet on Nasdaq, announced its decision to lay off nearly 12,000 employees in January 2023. Like Meta, Google’s stocks
    <a href="https://seekingalpha.com/news/3926500-why-did-google-stock-go-up-today-layoffs-soothe-investor-nerves">
     rose by around 6%
    </a>
    post this news.
   </p><h2>
    Conclusion
   </h2><p>
    The FAANG companies, including Facebook (now Meta), Amazon, Apple, Netflix, and Google, have experienced significant layoffs in recent years. These job cuts were primarily attributed to over-hiring during the pandemic and the subsequent decline in demand. Despite the layoffs, the stock prices of these companies responded differently. Facebook's stock price increased after announcing layoffs, while Amazon and Netflix saw declines in their stock prices. Apple, on the other hand, opted to pause hiring temporarily rather than laying off employees. Google experienced a rise in stock prices following its announcement of layoffs. Overall, the FAANG companies' layoffs highlight the dynamic nature of the tech industry and the need for these companies to adapt to changing market conditions.
   </p><h2>
    Frequently Asked Questions
   </h2><h3>
    1. Do stocks go up or down after layoffs?
   </h3><p>
    Layoffs may have an adverse impact on a company’s stock prices. However, in some cases, when companies cut personnel costs and redirect the savings towards long-term investments, the stock prices may react positively.
   </p><h3>
    2. What is the impact of layoffs?
   </h3><p>
    The impact of layoffs on employee morale is typically always negative. In terms of the impact on the stock prices of a company, it could either drive the prices up or down, depending on the market sentiment.
   </p><h3>
    3. What happens to stocks when companies spin-off?
   </h3><p>
    A spin-off occurs when a company sells off its subsidiary to create a new entity that is independent of the parent company. Spin-offs may lead to a temporary drop in the stock price.
   </p>

FAANG company layoffs: What caused it? How did it affect their stocks?

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