Meta stock rises after rumors of layoffs

Stocks of Facebook parent Meta closed up on Monday amid reports that it was planning to lay off thousands of its 87,000 employees this week, stoking debate on whether or not tech companies are overstaffed.

Meta shares rose 6.53% to $96.72 by close of trading, a welcome rally for a company that has lost around 70% of its value in 2022 alone. The Instagram and WhatsApp parents ended 2021 at $336 per share.

The Wall Street Journal reported earlier Monday that Meta is planning to begin “large-scale” layoffs this week – the first broad head-count reductions in the company’s 18-year history.

An announcement may arrive as soon as Wednesday, according to people familiar with the matter, with company officials already telling employees to cancel any nonessential travel.

It is not yet known how Meta’s cuts will compare to Twitter’s, who laid off 50% of its workforce on Friday.

Twitters new CEO and owner Elon Musk said he had “no choice” but to make the dramatic cuts because the platform was losing over $4 million per day.

Some observers have pointed out that the headcounts at Meta and Twitter have doubled since 2018, putting the current round of restructuring into perspective.

The layoffs involve big numbers but these companies have doubled their headcount since 2018 pic.twitter.com/w3hZ5jTrQH

— Matthew Yglesias (@mattyglesias) November 7, 2022

This has also fueled discussion about whether or not tech companies are overstaffed, especially after digital advertising boomed while many were stuck inside during the COVID-19 pandemic.

“The fact that Meta’s stock has risen so much on rumors of layoffs seems informative in the ‘are tech companies too overstaffed’ debate,” tweeted Arpit Gupta, associate professor of finance at New York University Leonard N. Stern School of Business.

“Looking at the Twitter layoff announcements, initial reaction is that I feel really sad for the people losing their jobs,” wrote Sean Trende, Senior Elections Analyst at RealClearPolitics.

“My second reaction is that many of the job descriptions seem to fall into the ‘sounds cool, but should a company really do that when its unprofitable?’"

Meta shares fell almost 25% in late October after it announced a drop in quarterly income due to continued pressure from TikTok and Apple’s recent ad-privacy changes, wiped out almost $85 billion of the tech giant’s market value. Amazon, Microsoft and Google parent Alphabet also saw their stock prices drop.