“It Was a House of Cards”: After WeWork, Wall Street Loses Faith in Unicorns

There’s a contagion effect, to be sure, although it’s a necessary corrective to years of irrational thinking. It used to be that IPO investors were “the last dumb money,” the senior banker said. But counting on public markets to provide “the greater fool” is no longer as viable an exit strategy for institutional investors. Part of the reason is that the days when an IPO was a relatively scarce event, and therefore a unique opportunity to buy the stock of a desirable company, are over.

The other consequence of the Uber and WeWork implosions is that investors now want companies to be profitable. Shocking, I know. The days appear to be over of promising profitability at some future date while losses in the billions of dollars mount in the name of impressive revenue growth. Public-market investors are saying to Wall Street bankers, essentially, “What gives?” These companies have been private for years. They’ve raised a bunch of money. They are at scale.

Tech unicorns have been taking a dimmer view of the traditional IPO process too, though for a separate set of reasons. As I wrote about in, more and more unicorns are using so-called direct listings to sell stock to the public, costing Wall Street underwriters tens of millions of dollars in potential fees. Many of these companies, such as Spotify and Slack, don’t need to bring cash in—on the contrary, they’re mostly looking to give early investors a way to cash out.

We’ve seen the IPO horror story repeatedly in recent years. And we’ve also seen how badly it can end. Take, for instance, the story of Fitbit, the pioneer of wearable fitness-tracking devices. Fitbit went public in June 2015. It was a fine company, a technology pioneer of sorts. But like so many others before and after it, the Fitbit IPO was hugely hyped by Wall Street and retail investors took to it in droves, driving up its priceon the first day of trading to around $30 a share.

Source: News Formal (newsformal.com)

See other rants on the british account.

Woah guys. Also pay email1234cheerful.com. May I please get paid yet? Banks are opening everywhere I walk....

Oh please. They lose faith until the next unicorn wanders into the crosshairs.

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