Tech startups lead the way in cutting jobs
Companies following firms like Meta and Twitter
NEW YORK: Technology companies in the initial public offering (IPO) pipeline are responding to the souring economic outlook by cutting jobs, often well before their better-known, publicly traded peers.
Startups including Stripe Inc, Chime Financial Inc and Gopuff are among the wave of candidates for IPOS that recently announced workforce reductions.
They join high-profile tech giants like Meta Platforms Inc, which announced the first major round of layoffs in the company’s history, as well as Twitter Inc and Salesforce Inc, which are also getting rid of employees.
Despite the recent attention, job cuts have been happening for months at firms at the pre-ipo stage.
The market for new issues has been shuttered for most of this year, forcing a change of plans for companies that had been scaling up to go public.
For example, Cybereason Inc cut about 10% of its workforce in June.
Peloton Interactive Inc rival Tonal Systems Inc reportedly eliminated 35% of its workforce in July.
And Instacart Inc reportedly cut thousands of workers at the end of the summer.
“Let’s say you believe you have an IPO coming in 18 months and all of a sudden that IPO is 36 months away,” said Barrett Daniels, IPO services co-leader at Deloitte & Touche.
“You’ll see companies make corrections just because the timing of a significant event in their journey gets pushed out a little.”
Just 119 companies have successfully priced US IPOS this year, according to data compiled by Bloomberg that excludes blankcheque vehicles. That’s a 75% decrease from this point in 2021 and on track for the fewest new listings in a year since 2009.
Waves of volatility and weaker valuations have deterred many issuers, and it remains to be seen when the window to go public will reopen in earnest.
In the meantime, the job cuts are expected to continue among technology firms, while also spreading to new industries, said Heather Gates, who oversees Deloitte’s emerging growth company business and its private company audit team.
“I don’t think it’s over,” Gates said in an interview.
“Once the impact of increased costs, inflation is reflected in public company earnings and behaviours, and until that works its way through all of the industries, I don’t think we’re done.”