BlackRock Prepares for Workforce Cut

BlackRock, the largest money management company globally, is reportedly preparing to cut about 3% of its worldwide staff, amounting to approximately 600 employees. This move seems to be in anticipation of the U.S. Securities and Exchange Commission’s (SEC) potential approval of their spot Bitcoin exchange-traded fund (ETF). Although internally regarded as standard procedure, these layoffs follow a period of significant growth in the firm’s assets under management (AUM). The company plans to announce these job cuts soon.

BlackRock’s anticipated workforce reduction is similar to its strategy last year, where layoffs corresponded with employee performance evaluations. Despite a 21% drop in its shares in 2022, BlackRock’s stock rose by 6% in 2023. According to Fox Business, a BlackRock spokesperson chose not to comment on these layoffs. The company is scheduled to disclose its fourth-quarter earnings this Friday.

One possible reason for the layoffs is BlackRock’s shift to a more mature business phase after years of substantial growth in AUM. Analysts expect a 2.46% decrease in year-over-year earnings for the fourth quarter, amounting to $8.71 per share. As of the third quarter in 2023, BlackRock’s AUM was $9 trillion, down from its peak of over $10 trillion in 2022.

The reduction in assets coincided with increased political scrutiny over BlackRock’s focus on Environmental Social Governance (ESG) investing. This strategy allocates investments to companies in the sustainable energy sector or those reducing their carbon footprint and promotes corporate governance measures like boardroom diversity.

Despite this, BlackRock saw a significant $187 billion influx into its robust Exchange Traded Fund (ETF) business, which includes products that track a collection of securities traded on major exchanges. If the SEC approves BlackRock’s spot Bitcoin ETF, the firm will be among the elite asset managers offering a crypto investment product.

The SEC’s deadline for deciding on BlackRock’s Bitcoin ETF is January 15, following recent amendments by other spot Bitcoin ETF applicants. On January 5, BlackRock filed a 19b-4 amendment for its spot BTC ETF application, aligning with other asset managers. These filings are critical for the SEC approval process, but S-1 document completion is vital for U.S. exchanges to list shares of investment securities directly linked to cryptocurrencies.

source