What happened
Shares of the car insurance company Root (ROOT 0.02%) were down nearly 20% heading into the final hour of trading today after the company announced layoffs on Thursday.
So what
Root is laying off 330 employees, which is equal to 20% of its workforce. The company said in a regulatory filing that the move is being made due to inflationary pressure and in order to drive efficiency.
Image source: Getty Images.
Root said the layoffs will help the company streamline its claims and sales departments. The layoffs are expected to result in a charge of between $7 million and $8 million for severance, benefits, and related costs.
In a letter to employees, Root CEO Alex Timm said, "As the pandemic has continued to evolve, touching every part of our economy, our company has been no exception. Supply chain and inflationary pressures have caused historic levels of loss cost increases."
Now what
Root went public in October 2020 and debuted for about $24 per share. Since then, it's been all pain as the stock now trades at less than $1.90.
The recent realignment by the Federal Reserve -- which has indicated in recent months that it will increase its benchmark overnight lending rate multiple times this year and potentially shrink its balance sheet -- has not helped, beating down the tech sector.
I wouldn't say this business is finished, but I wouldn't recommend buying until tangible progress can be seen. The company will report fourth-quarter and full-year earnings on Feb. 24.
