What happened
Upstart Holdings (UPST 2.76%) was bouncing up and down on Tuesday, jumping 8.5% higher shortly after the opening bell but then falling throughout the course of the day, finishing the day down 4.4% to $22.17 per share.
The major indexes were down slightly as the Dow Jones Industrial Average was down 80 points (-0.2%), the S&P 500 was down 16 points (-0.4%), and the Nasdaq was down 97 points (-0.9%).
So what
Upstart Holdings, a fintech that uses artificial intelligence to handle loan requests, was up early, likely on a strong earnings report from fellow banking fintech SoFi Technologies. SoFi posted record quarterly revenue in the third quarter with a net loss of just $0.09 per share, both of which beat estimates.
SoFi also raised its guidance for the full year, boosting its adjusted revenue projections to a range of between $1.517 billion and $1.522 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to a $115 million to $120 million range, up from $104 million to $109 million.
Upstart got some initial tailwinds from the good SoFi news as its priced soared. But that initial surge did an about-face as investor sentiment changed drastically when Upstart posted a Securities and Exchange Commission (SEC) filing later in the day.
Now what
The filing indicated that Upstart was going to reduce staff by 140 hourly employees. The Nov. 1 SEC filing stated the following:
Given the challenging economy and reduction in the volume of loans on our platform, on November 1, 2022, we notified approximately 140 hourly employees who help process loan applications that their positions had been eliminated.
This is obviously not a good sign, particularly since the layoffs are due to a reduction in loan activity. Upstart reports its fiscal Q1 earnings on Nov. 8, so investors should be tuned into that report to get a better sense of why loan volume is down and how that impacted revenue and earnings.
