All it took was a memo from Redfin’s (NASDAQ:RDFN) management to send RDFN stock sharply lower today. The disclosure of Redfin layoffs certainly put investors on edge, but financial traders also had to contend with the closing of Redfin’s iBuying business. On top of all that, the company’s CEO make a dire-sounding statement about the housing market in general.
“To every departing employee who put your faith in Redfin, thank you. I’m sorry that we don’t have enough sales to keep paying you.” This apology from Chief Executive Glenn Kelman probably didn’t make Redfin’s 862 “brilliant, loyal” and freshly laid-off employees feel much better.
It also didn’t do much to quell the anxiety of Redfin’s investors, as the company just revealed it’s letting go 13% of its workforce. Alarmingly, Redfin’s employee total has declined 27% since April 30.
Redfin Layoffs Prompt a Selloff in RDFN Stock
Sometimes, workforce reductions cause stocks to go up. This wasn’t the case today, though, as Redfin’s layoff disclosure prompted a 9% drop in RDFN stock.
However, the selloff wasn’t only a response to the headcount reduction. Kelman’s memo included a worrisome prediction: “The Housing Market Will Get Smaller in 2023.”
That’s certainly not what RDFN stock investors wanted to hear today. And if anyone would have a fairly good idea of where the housing market may be headed, it would be Redfin’s management.
But wait — that’s not all of the bad news. On top of everything else in that memo, Redfin also announced the closing of its iBuying business. Known as RedfinNow, this segment would be expected to lose $22 million to $26 million dollars in 2022 if Redfin kept it open.
It’s startling to hear Redfin’s CEO “grieve for RedfinNow,” and the company’s shareholders are understandably anxious. As RDFN stock falls, investors now have reasons to worry about Redfin and the U.S. housing market as a whole.
On the date of publication, David Moadel 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.