Coinbase “slams the brakes” on its hiring plan as Wall Street enthusiasm cools


  • Coinbase’s move to freeze hiring and cancel offers sent shockwaves through the cryptocurrency industry.
  • It also comes at a time when Wall Street analysts’ confidence in the company has generally declined.

“I just got an email today saying my offer (offer) was cancelled…due to a major change in Coinbase’s hiring plans.”

Ashutosh Ukey confided his misfortune, one of the tech workers who thought they could work at one of the largest digital asset exchanges after Coinbase cancelled offers as part of a scaled-back hiring plan Hope was dashed.

On May 16, Coinbase announced that it would be slowing hiring in response to the ongoing market slump. Last week, the company further said it would cancel some offers “for the foreseeable future” and extend the hiring pause.

“This is devastating for me,” wrote Ukey, a machine learning programmer, on LinkedIn.

The decision to cancel the offer has sparked speculation about the reasons behind Coinbase’s cost-cutting measures. However, these moves are more likely to be a direct reaction to Wall Street forecasts than to be caused by any other type of exogenous factors related to the so-called “crypto winter.”

Previously, market research analysts covering Coinbase stock appeared to be sticking with the company despite its falling stock price.

But major banks have slashed their price targets on Coinbase in recent months, with the average price target dropping from $279 in the week of April 22 to $145 at press time, according to The Block Research. This means that the last target price was 96% higher than the current fair market price.

Coinbase 'hit the brakes' on its hiring plan as Wall Street enthusiasm cools

Image credit: The Block Research, Factset

The reduction in company spending — total operating expenses of $1.7 billion in the first quarter of 2022 — could help win back the confidence of analysts who emphasized spending on earnings calls.

A May 10 analyst note from Bank of America’s Center for Global Research stated: “The number of employees rose 33% in the first quarter and operating expenses were higher than expected due to strong hiring momentum at Coinbase (COIN).”

Adjusted EBITDA, a measure of public companies’ financial performance, came in at just $20 million, well below Wall Street’s estimate of $448 million.

As for the hiring itself, Goldman Sachs analyst Will Nance said on the exchange’s Q1 earnings call that the quarter’s 1,200 hires was a staggeringly “large” number. In response, Coinbase CFO Alesia Haas said the slowdown in hiring was a means for the company to cut expenses.

To be sure, not every analyst has doubts about costs. In an interview with The Block, BTIG analyst Mark Palmer said focusing on adjusted EBITDA is “misleading,” adding that while Coinbase already has a big presence in the cryptocurrency space, it is still A “work in progress”.

“If you’re an investor in a growth company in a competitive environment, what you really want to see is investment, and you want to see spending,” he said.

But while Coinbase’s cost-cutting will have a clear impact on profits, there are more intangible costs associated with canceling potential offers. Coinbase initially told newly hired employees that their jobs were safe, according to publicly available emails.

Blind, a social network for professionals focused on anonymity, said in an email shared with The Block that it has a plan in the face of “market volatility” and won’t “cancel any employee who has signed up” or received offer”.

Needless to say, internally, employees were concerned that the move would have a negative impact on the company’s reputation and related relationships. Multiple sources told The Block that despite Coinbase’s hiring efforts over the past year, the company remains understaffed and its employees have been overworked in what is known to be a fast-moving and intense culture.

“We have a strong work culture, and it’s become normal to be pushed out of our comfort zone,” LJ Brock, the company’s chief people officer, has pointed out in the past.

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