A rough year for IPOs has led investors to rethink their strategies

Public market investors have switched up their IPO strategies as some of tech’s biggest unicorns face trouble on Wall Street.

September 30, 2019

It’s hard out there for startups, and this year has been especially cruel to companies going public. 

As recession rumblings get louder, more investors will be saying no to the IPO if companies can’t produce big profits… and that’s true for even the biggest names.

Last week was rough…

Endeavor Group Holdings — a large Hollywood talent agency owner — scaled back its offering after the stock market said “meh.” 

Peloton’s debut disappointed. Uber’s shares hit an all-time low after the company reported a second-quarter net loss of $5B+. And WeWork … well, you know.

Since going public 2 years ago, meal-kit OG Blue Apron’s customer count fell from 1m to 550k. At one point its stock price dipped so low it was in danger of being delisted from the NYSE.

What’s the common denominator?

Few of these companies are raking in the cash. But that doesn’t make them anomalies. 

Last year, more than 80% of companies filing IPOs were unprofitable… and they still cleaned up. That’s because the market at the time favored growth and novelty over profit.

We’ve seen this before

Think back to the early 2000s when investors were hot for internet-based companies… and then came the dot-com crash. 

As the US-China trade war heats up, investors are looking closer at balance sheets and bottom lines. 

Meanwhile, the market conditions these companies are seeing could spell trouble for the broader market. Buckle your seat belts, kids.

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