Tech stock rout: Apple, Microsoft, Amazon, Atlassian, Tesla shares hit
Redundancies are likely as tech companies brace for months of pain ahead and the industry loses hundreds of millions in shareholder value, experts say.
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Australian tech stocks have suffered their worst drop in months, with major tech stocks Block, WiseTech Global and Xero all posting double-digit losses following a tech rout in the US.
The S&P/ASX All Technology Index, which includes high-profile tech stocks Computershare, Seek and Xero has plunged by 6.6 per cent at 12.30pm AEST, and is down a whopping 39 per cent in the last six months, wiping hundreds of millions in investor value.
DigitalX, the world’s first publicly listed blockchain technology company, is one of the biggest victims on Tuesday suffering a 19 per cent drop at 12.30pm, while Jack Dorsey’s payments company Block – which earlier this year merged with buy now, pay later darling Afterpay – is down by 18 per cent, losing 50 per cent of its valuation in six months.
Douugh, which offers a mobile banking, budgeting and investing smartphone application, is down 16.6 per cent, while buy now pay later challengers Sezzle and Splitit are down 16 per cent and 15 per cent respectively.
Other major falls include ASX-listed family safety apps Spacetalk, down 15 per cent, and Family Zone Cyber Safety, down 12.7 per cent at 12.30pm AEST.
The wipe-out follows a similar rout of the tech-heavy Nasdaq Composite, which plunged by 4.68 per cent overnight. The S&P500‘s top 10 companies have lost more than $US1 trillion in valuation in just four days.
Tech giants Apple, Microsoft and Amazon suffered the biggest hits overnight, while Australian tech company Atlassian dropped in valuation by 9.5 cent, and Tesla was down 7.4 per cent.
“It is not very surprising to see such a strong downturn as we have noticed an increased correlation over the last few years between traditional stocks, which have also tanked recently, and the cryptocurrency market,” XTB chief market analyst Walid Koudmani said.
The price of leading cryptocurrency bitcoin meanwhile is in free fall, dropping by 16 per cent overnight to a two-year low of $US22,601.
The drop was fuelled further by two major crypto exchanges suspending their transactions, with The Celcius Network citing ‘extreme market conditions’ for the pause, impacting its 1.7 million customers, while Binance also temporarily halted withdrawals.
The widespread carnage has flowed through to private tech start-up valuations, and experts are predicting widespread lay-offs.
“We have been seeing pressure in the private markets and some investors are pulling back or slowing down their investments which will undoubtedly cause short term challenges for start-ups, particularly those who need to raise significant capital in the immediate term,” Adam Milgrom partner at impact investment firm Giant Leap said.
“However, as long term investors we are still actively investing through this time as we are confident that the trends that underpin our investment thesis, that the world needs more companies providing solutions to healthcare, education, energy and the environment, will continue to be drivers beyond the current market cycle so we’re very optimistic about the long term future of the impact start-up ecosystem.”
Den Burykin, manager of start-up consultant Fastlane Solutions and CIO of Wholesale Investors, said that conditions will likely continue to be dire for the next 12 to 24 months.
“Start-ups everywhere are recognising the growth projections on which their valuations and capital raises were based on are no longer on the table,” he said. “And hoping that growth will return at the end of the all of this is not a plan.”
The executive said that technology start-ups need to use this time to regroup, focus on product development and invest in their core competency.
“If they’ve built in some contingency into their business plan, this will be an easier process. Either way, there will be redundancies across the industry,” he said.
“The aftermath of a cash crunch is often misdiagnosed by management as an HR problem. Yes, when you let people go, you have to wrap your arms around the staff you’ve kept. But unless you’ve completely convinced everyone that the decisions you’ve made are the right ones, their confidence in the business will be shaken beyond repair.”
“So level with your staff. Stand in front of them and tell them what the problem with the business model is and what you’re doing to fix it. If you don’t, they’ll figure it out for themselves.”
Originally published as Tech stock rout: Apple, Microsoft, Amazon, Atlassian, Tesla shares hit
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