Employees sue Twitter as bloodbath looms; Udaan sacks another 1,000

Also in this letter:
■ Udaan sacks 1,000 employees and contractors in 2nd round of layoffs
■ US tech layoffs skyrocket as firms struggle with shrinking economy
■ Apple’s India vendors expanding capacity amid China slowdown

Twitter faces class-action lawsuit over mass layoffs

Twitter was sued over Elon Musk’s plan to lay off about half of its workforce, Bloomberg reported on Friday, citing a class-action lawsuit filed in a San Francisco federal court.

Driving the news: Twitter staff received an email saying that the company would alert employees by 9 am Pacific Time (9.30 pm IST) on Friday about whether they had been laid off. “In an effort to place Twitter on a healthy path, we will go through the difficult process of reducing our global workforce on Friday,” the email read.

Musk is expected to sack roughly half of Twitter’s roughly 7,500-odd employees.

Allegations: The lawsuit alleged that the company was eliminating workers without providing enough notice, in violation of the Worker Adjustment and Retraining Notification (WARN) Act, a federal law that requires employers to provide advance notice to employees affected by plant closings and mass layoffs.

Filed by attorney Shannon Liss-Riordan, the lawsuit sought a court order requiring Twitter to obey the WARN Act and prevent it from asking employees to sign any documents that would take away their right to participate in litigation.

Locked out: Several Twitter employees took to the platform, saying they had lost access to their laptops, emails and internal Slack channels. The hashtag #Lovewhereyouworked began trending on Twitter soon after.

The company’s email added that Twitter offices would be temporarily closed and badge access suspended. “If you are in an office or on your way to an office, please return home,” the email read.

“Looks like I’m unemployed y’all. Just got remotely logged out of my work laptop and removed from Slack. #OneTeam forever. Loved you all so much. So sad it had to end this way (sic),” said Simon Balmain, who had worked as a senior community manager at Twitter.

Twitter offline for some: Meanwhile, Twitter was down for several users on Friday, with many reporting problems with the site. Users said when they tried to log in they were greeted by a message that read: “Something went wrong, but don’t worry – try again”.

According to website Downdetected, 92% of complaints were about issues with the website, while just 6% were to do with the app.

Advertisers press pause: Amid the chaos, several companies have stopped placing ads on the platform until they get a clearer idea of Musk’s plans. On Friday, General Mills Inc said it’s temporarily pausing advertising on Twitter, joining Volkswagen AG’s Audi and General Motors in rethinking their presence on the platform.

Udaan sacks 1,000 employees and contractors in second round of layoffs

Business-to-business (B2B) ecommerce marketplace Udaan has laid off 300-350 on-roll employees and a significant chunk of its contract workforce, for a total layoff count to over 1,000 people, according to sources aware of the matter.

Round 2: This is the second round of layoffs for the company after it laid off 180-200 employees – or 5% of its workforce – and 700-800 contract workers in June.

“As we move forward in our journey towards making Udaan a profitable company, the efficiency enhancement drive and the evolution in business model has created some redundancies in the system, with some roles no longer required. As a responsible organisation, we are working towards providing all requisite support to the impacted employees,” the company said in a statement.

Debt funding: The development comes after the company raised $120 million through convertible notes from existing shareholders and bondholders in late October. This is the second time the company is raising funds through convertible notes. It previously raised about $225 million this way in January.

A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round. The primary advantage of issuing convertible notes is that it does not force the issuer and investors to determine the value of the company, thus avoiding ‘down rounds’ at a lower valuation.

Growing trend: As dealmaking becomes more difficult, many companies – including Byju’s, Boat and Pharmeasy – are resorting to raising funds through these debt instruments to preserve their valuations, we reported on October 12.

US tech layoffs skyrocket as firms struggle with shrinking economy

The funding winter, soaring inflation, and fears of an imminent recession are hitting US tech companies hard across the globe.

Here are some of the firms that have announced layoffs or hiring freezes in the past few days.

Lyft: The ride-hailing company said it would fire 13% or nearly 700 employees to cope with the weakening economy.

Stripe: The digital payments giant, which was valued at $95 billion in its last funding round, is cutting its headcount by about 14%, leaving it with about 7,000 employees.

Opendoor: The real estate startup will let go of about 550 people or 18% of its staff across all functions, its cofounder and CEO Eric Wu announced in a blog post on Wednesday.

Chime: One of the world’s largest fintech firms said it will sack 12% of its 1,300 workers.

Amazon: Though Amazon has not decided to trim its headcount as of now, it is pausing “new incremental” hiring across its corporate workforce.

Apple’s India vendors expanding capacity amid China slowdown

Apple’s contract manufacturers in India – Foxconn, Wistron and Pegatron – are in an expansion phase, adding more assembly lines to their facilities to offset the slowdown in iPhone manufacturing in China ahead of the upcoming Chinese New Year amidst robust local demand, industry executives familiar with the matter told us.

Yes, but: The ongoing lockdown in Foxconn’s plant in Zhengzhou, China – the world’s largest iPhone manufacturing facility – won’t trigger Apple to increase manufacturing in India right away, they added.

That’s because it’s easier for Foxconn to simply shift production to another unit within mainland China. Also, its partners in India don’t yet have the capacity and technical expertise needed to handle the additional production.

India bags new manufacturer: Meanwhile, Apple’s Taiwanese contract manufacturer Pegatron Corp has started assembling the latest iPhone 14 model in India. This makes Pegatron the second Apple supplier to produce the iPhone 14 in the country, people familiar with the matter told Bloomberg News.

ETtech Deals Digest

The funding tap has been running dry for most Indian startups for some time now as investors around the world have been wary of pouring money into risky new ventures.

The US Federal Reserve’s decision to hike interest rates by another 75 bps this week roiled markets and worsened the liquidity crunch. Other major central banks, including the Bank of England, have also hiked rates.

Some Indian startups have been left with no choice but to lay off workers to cut costs, while others are using debt instruments such as convertible notes to raise money.

Here’s a list of all the startups that raised funds this week.

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai. Graphics and illustrations by Rahul Awasthi.