Coinbase, a cryptocurrency trading platform, has announced plans to lay off 950 employees due to poor market conditions.
The layoffs are part of the company’s cost-cutting measures, according to a filing with the US Securities and Exchange Commission (SEC) on Tuesday. According to Entrepreneurng, it will be completed by the second quarter of this year.
The company also stated that the staff reduction would reduce its operating expenses by 25% quarter over quarter. Today, all affected employees will be informed of their fate.
This is the second time the company has laid off workers in less than a year. In June 2022, Coinbase laid off 18% of its workforce in a move that affected nearly 1,100 employees.
How Coinbase got here
Explaining the circumstances that led to the company laying off twice in less than 12 months, Coinbase co-founder and CEO Brian Armstrong said this in a blog post:
I’d like to explain how we got here, what it will mean for those impacted, and how we’ll move forward. I also want to be clear that, while some of the factors that have brought us to this point are beyond our control, accountability rests with me as the CEO.
“We also reduced headcount last year as the market started to correct, and in hindsight, we could have cut further at that time.”
Every year we do our annual planning process where we run different scenarios for revenue: bull, base, and bear. The crypto industry is difficult to predict, but it’s important to have planning in place that ensures we can succeed as a business in multiple potential outcomes. Over the last decade, Coinbase has made it through multiple bear markets using this process. This is the first time we’ve seen a crypto cycle coincide with a broader economic downturn, but otherwise, it is similar.
As we examined our 2023 scenarios, it became clear that we would need to reduce expenses to increase our chances of doing well in every scenario. While it is always painful to part ways with our fellow colleagues, there was no way to reduce our expenses significantly enough, without considering changes to headcount, he explained.
Armstrong added that as part of the headcount reduction, the company would be shutting down several projects with a lower probability of success.
Affected teams will receive communication on this today. Our other projects will continue to operate as normal, just with fewer people on the team, he said.
Impacts on the company
According to the SEC filing, Coinbase will incur total restructuring expenses ranging from $149 million to $163 million, with cash charges ranging from $58 million to $68 million for employee severance and other termination benefits.
The Company anticipates that approximately $91 million to $95 million of the total charges incurred in connection with the Plan will be in stock-based compensation expenditures related to the acceleration of the vesting of outstanding equity awards in accordance with the terms of such awards. The Company expects to recognize the majority of these charges in the first quarter of 2023.
