Here's why the Lendlease share price is tanking on Tuesday

Short sellers are riding the Lendlease share price lower today after the announcement of global job cuts.

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Key points

  • The Lendlease share price is down 4.7% to $8.15 on Tuesday following a leaked internal memo
  • Multiple sources have reported the memo detailed a 10% reduction in Lendlease staff numbers globally
  • The cuts are expected to deliver $80 million to $100 million in cost savings

The Lendlease Group (ASX: LLC) share price is under pressure today amid reports of job cuts.

Shares in the listed property company are swapping hands at $8.15, down 4.7% from yesterday's closing price. Comparatively, the benchmark S&P/ASX 200 Index (ASX: XJO) is ticking 0.42% lower, supported by utilities and financials.

Let's take a closer look at why Lendlease shares are drastically underperforming the market on Tuesday.

Leaning out cuts into Lendlease shares

It appears an internal memo has been leaked today, revealing Lendlease's decision to strip out 10% of its global workforce.

The changes will see 740 jobs within the company cut, comprised of a 15% offshore reduction and a 5% local reduction. Following the staff cuts, the company expects to obtain $80 million to $100 million in annual savings.

According to the Sydney Morning Herald, the memo — issued by global CEO Tony Lombardo — outlined America, Europe, and Asia Pacific as the regions to experience the most significant reduction. A 'permanent shift to being an investment-led company with a leaner operating structure' was supplied to warrant the decision.

Furthermore, the call to make cuts follows the company's decision to freeze hiring on 1 July amid the inhospitable commercial property environment.

Although a lightened expenses load might seem beneficial for a company striving to return to acceptable profit margins, today's Lendlease share price would leave you thinking otherwise.

Perhaps the market is viewing it as 'blood in the water'. After all, the global property developer has featured in the top 10 most shorted ASX shares for several weeks, including the most recent instalment.

Uncanny timing

Coincidentally, it was only last week that Motley Fool senior journalist Tony Yoo covered one fund manager's stance on Lendlease shares.

Investment firm Allan Gray is the third-largest shareholder in the troubled property developer. Yet, the unfortunate share price performance has not shattered the team's confidence in the potential for returns.

Instead, analyst Tim Morrison believes 'there is cause for optimism'. At the time, Morrison highlighted cost reductions as a positive factor. It appears we are now seeing some of these reductions come to fruition.

Still, the Lendlease share price remains 14.8% underwater compared to a year ago.

Created with Highcharts 11.4.3Lendlease Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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