What happened

Shares of Brazilian fintech company StoneCo (NASDAQ:STNE) steadily fell on Tuesday, after the company announced big cuts to its workforce. The stock closed 12% down for the day.

For StoneCo shareholders, today's drop adds to the pain. Shares are down more than 40% in 2020.

STNE Chart

STNE data by YCharts

So what

StoneCo is a high-growth company, and it hired staff anticipating future business needs. However, Brazil's economy is hurting due to the COVID-19 pandemic. There are currently over 90,000 active cases in the country and climbing, forcing many small and medium-sized businesses -- StoneCo's customers -- to close. For now, it's working with customers by providing financial relief and granting microloans. 

Given the reality of the economic slowdown, StoneCo won't need as many employees as it previously predicted. Therefore, it's cutting the workforce to meet present needs. In a letter, CEO Thiago Piau said 1,300 jobs -- around 20% of employees -- will be cut. It's a reminder of the headwinds facing the company, which is why the stock fell today.

A man places hands on his head in frustration as he looks at a red, down stock chart.

StoneCo stock is down more than 40% year to date. Image source: Getty Images.

Now what

When it comes to the coronavirus, it's important to look for changes that may be permanent. For StoneCo, it mentioned beginning to invest in more online financial products, rather than giving so much attention to physical point-of-sales devices. That's something worth watching.

StoneCo will provide investors with greater insight into its current reality and its future when it reports earnings on May 26. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.