Pro Perspectives 9/27/19

September 27, 2019

As we end the week, let's take a look at the IPO market …

Although there have been over 160 IPOs this year, the Silicon Valley "disrupters" get all of the media attention, because Silicon Valley's true competitive advantage isn't innovation, but the deep pockets of Venture Capitalists, using other people's money/i.e. pension funds, to buy media, and craft a story of world changing innovation.

They, then, sell dollars for 50 cents, to drive hyper-growth rates in revenues, but also hyper-growth rates in losses. 

When the public takes the bait on the IPO, the wealth gets transferred to the Venture Capitalists and founders, and the public shareholders get left with these charts …

Here's Lyft, a company that had a $25 billion valuation when it went public, yet did a little over $2 billion in revenue, while losing almost a billion dollars — with slowing revenue growth and widening losses

Even though the number two in ride-sharing company (Lyft) beat the number one (Uber) to the IPO punch, setting the table for disappointment, Uber still followed through with a public offering in May.  And those that bought the stock have this chart …

The latest casualty has been WeWork. 

This is another Silicon Valley story wrapped around an existing industry (office suites), and sold as innovation.  But they appear to be late the party.  The IPO was pulled because investor demand was low, for a loss making commercial real estate company that's looking for a high tech stock valuation.