Although micro-mobility firm Helbiz (NASDAQ:HLBZ) enjoyed an initial strong start to seemingly beat the Monday blues, HLBZ stock quickly struggled. Initially, the recently announced completed acquisition of sector peer Wheels Lab bolstered sentiment due to its footprint expansion potential. However, management also disclosed significant cost-cutting measures, raising fears about industry viability.
First, on Nov. 18, Helbiz announced that it completed its merger with Wheels Lab. Through the deal, the collective enterprise should “strengthen the ability to operate by expanding Helbiz’s presence to 67 markets globally, create a more diversified business model, and enhance the financial profiles of the Company,” per the accompanying press release.
“Wheels’ assets and industry expertise are invaluable to us. We believe that the acquisition can accelerate our efforts to advance our product development, enhance customer experience, and push our top line and operating efficiency to the next level,” stated Helbiz founder and CEO Salvatore Palella.
Though fundamentally a positive for HLBZ stock, share stumbled on the axe-swinging component of recent news items. According to Helbiz’s official statement on the matter, “[t]he cost cuts and staff reduction will lower the monthly burn rate between 20 to 30%.”
Further, the disclosure mentioned that over the next several days, “staff will be reduced in the U.S. and Europe by 15% across corporate and operations teams. As well, a deep review of current costs and obligations will be undertaken that will look to further reduce spend.”
HLBZ Stock Faces Potential Economic Pressures
Generally speaking, layoffs at publicly traded companies spark upside movement in their equity units. Fundamentally, such actions signal serious intent about rectifying profitability issues. Certainly, profitability was at the core of Helbiz’s job cuts. However, the news failed to engineer positive gains for HLBZ stock.
For one thing, TechCrunch argued that Helbiz’s acquisition of Wheels largely amounted to a desperation measure. Facing a delisting risk from the Nasdaq exchange — presently HLBZ stock trades hands at 17 cents, well below the minimum $1 — Helbiz suffers other critical vulnerabilities, such as dwindling cash reserves and massive struggles to bolster the bottom line.
Second, it’s quite possible that investors abandoned ship on HLBZ stock based on brewing macroeconomic pressures. In recent months, several institutions warned about global slowdown risks. Historically, one of the pain points during recessions is the broader mobility sector. Not surprisingly, vehicle miles traveled at best decelerate during recessions and at worst decline sharply.
To be fair, should employers recall their employees — a not unrealistic proposition — then wider mobility demand may rise, which could help HLBZ stock. However, even under this framework, investor patience may be running thin. Since the beginning of this year, Helbiz has dropped an alarming 97% in equity value.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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