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Although micro mobility company Helbiz (NASDAQ:HLBZ) enjoyed an initial strong start to seemingly beat the Monday blues, HLBZ stock quickly struggled. First, the recently announced completed acquisition of industry peer Wheels Lab supported sentiment due to its potential for expansion. However, management also announced significant cost-cutting measures, fueling concerns about the profitability of the industry.
First, on November 18, Helbiz announced that it had completed its merger with Wheels Lab. According to the accompanying press release, the transaction should allow the collective company to “strengthen the ability to operate by expanding Helbiz’s footprint into 67 markets worldwide, create a more diversified business model and improve the company’s financial profiles”.
“Wheels’ assets and industry expertise are invaluable to us. We believe the acquisition can accelerate our efforts to advance our product development, improve customer experience and take our revenue and operational efficiencies to the next level,” said Salvatore Palella, Founder and CEO of Helbiz.
While the stock is fundamentally positive for HLBZ stock, it stumbled on the axe-wielding component of the recent news. According to Helbiz’s official statement on the matter, “[t]The cost cuts and downsizing will reduce the monthly burn rate by 20-30%.”
In addition, the disclosure noted that over the next few days, “US and Europe staff will be reduced by 15% across corporate and operations teams. A thorough review of current costs and commitments will also be conducted to further reduce spending.”
HLBZ stock is under potential economic pressure
In general, layoffs at publicly traded companies trigger an upward movement in their stock units. Basically, such measures signal a serious intention to fix profitability problems. Certainly profitability was at the heart of Helbiz’s job cuts. However, the news didn’t translate into positive gains for HLBZ stock.
for one thing TechCrunch argued that Helbiz’ acquisition of Wheels was largely a measure of desperation. Given a risk of delisting from the Nasdaq Exchange – Currently, HLBZ shares are trading at 17 cents, well below the $1 minimum – Helbiz suffers from other critical vulnerabilities such as: B. dwindling cash reserves and massive struggles to strengthen the bottom line.
Second, it’s entirely possible that investors have steered clear of HLBZ shares due to emerging macroeconomic pressures. In recent months, several institutions have warned of risks of a global slowdown. Historically, one of the pain points during recessions has been the broader mobility sector. Unsurprisingly, vehicle miles traveled during recessions slow at best and fall sharply at worst.
To be fair, should employers recall their employees — a not unrealistic proposition — then mobility demand could continue to rise, which could help HLBZ stock. But even under this framework, investors’ patience could be waning. Since the beginning of this year, Helbiz stock has fallen an alarming 97%.
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On the day of publication Josh Enomoto had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author and are governed by InvestorPlace.com Posting Policies.