How should the market react to yesterday’s announcement that Atlassian (NASDAQ:TEAM) is implementing a round of job cuts? You might assume financial traders would be anxious about this development. Interestingly enough, though, TEAM stock is rising this morning despite the news about Atlassian layoffs.
In case you’re not familiar with the company, Atlassian is a large software developer based in Australia. The company has a $46 billion market capitalization and has been around since 2002.
Since this is a large company, it’s a big deal that Atlassian plans to lay off 500 full-time employees. This cut equates to roughly 5% of the company’s workforce. Thus, Atlassian is now a member of what I call the “Big Tech Layoff Club,” which seems to be growing every day.
Atlassian co-CEOs Mike Cannon-Brookes and Scott Farquhar wrote a memo to the company’s employees regarding the layoffs. “We need to go further in rebalancing the skills we require to run faster at our company priorities,” the co-CEOs explained.
What’s Happening With TEAM Stock?
As usual, the financial markets are full of surprises. Despite the news of Atlassian layoffs, which might sound like a negative development for the company, TEAM stock is up more than 1% this morning.
This may be considered a counterintuitive response, especially since Atlassian expects to “incur about $70 million to $75 million in restructuring costs, primarily through the end of June,” according to a Bloomberg report.
On the other hand, it’s possible that investors saw this coming and were prepared for the layoffs. After all, Atlassian probably over-hired as the company’s “headcount more than tripled in the last four years.”
Besides, Atlassian’s 5% workforce reduction might be viewed as less severe than some folks may have anticipated. While layoffs are unfortunate, Atlassian appears to be reducing its expenditures without enacting drastic measures. So, today’s price action in TEAM stock — although seemingly counterintuitive — is likely a collective expression of relief.
On the date of publication, David Moadel did not hold (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.