Why 2019’s BILLION Dollar IPO Stocks Like Uber and Lyft Are Struggling

Why 2019’s BILLION Dollar IPO Stocks Like Uber and Lyft Are Struggling


Hi, and welcome to The Motley Fool’s Bottom
Line series! In this video, we’re taking a look at some
of 2019’s most notable billion-dollar IPOs to see how they’re performing
since they’ve gone public. There are a lot of companies with valuations
over $1 billion that have gone public in 2019. Here’s a list of some of the
largest and most well-known ones. IPOs often get a lot of attention because
they offer new opportunities to invest in fast-growing companies
with promising potential. But, just because a company gets lots of attention
leading up to its IPO, it doesn’t mean that its stock will perform well
after the company goes public. For examples of how quickly a billion-dollar IPO
can fizzle, look no further than Uber, Lyft, and Peloton. Uber was the largest and one
of the most anticipated IPOs of 2019. The ride-sharing company’s stock climbed more than
11% in the first seven weeks after going public. But those initial share
price gains have faded. Uber’s stock is down 24% since its IPO amid
rising concerns that the company is spending too much money and not
growing revenue fast enough. Uber’s losses have continued to widen, leaving
investors worried that the company’s former meteoric growth and
dominance in the ride-sharing market won’t be enough to make
the company profitable. Uber laid off 400 employees and announced
a hiring freeze just two months after going public, which is a bad sign for a company
that’s supposed to be in growth mode. Additionally, the company is also dealing
with an increasingly strict regulatory environment for its drivers, which work as
independent contractors for the company. With the ride-sharing giant facing hurdles
on multiple fronts, it’s no wonder why Uber has fallen out of favor
with some investors. Of course, it’s hard to talk about Uber’s IPO without
talking about its ride-sharing competitor Lyft. Lyft went public at a valuation of about
$24 billion in March 2019 and has had a rocky performance ever since. To date,
Lyft’s share price has tumbled more than 40%. Lyft is unprofitable right now and lost $463
million in the third quarter of this year. It’s also facing similar hurdles to Uber. As California moves closer to reclassifying
independent contractors as employees, Lyft could face increasing
costs related to its drivers. If other states follow California’s lead,
it could eventually put Lyft’s and Uber’s underlying business in jeopardy. Of course, not all of the IPO flops of 2019
happened to the ride-sharing market. Peloton, which sells expensive tech-heavy
workout equipment, as well as monthly workout subscriptions, has seen its
stock slide 11% since its IPO. The company has done a good job of growing
and retaining users, and has about 1.4 million accounts right now, with a half a million connected
subscribers, and a 95% customer retention rate. But some investors are understandably concerned
that consumer interest in buying luxury workout equipment, in addition to a monthly subscription fee,
could decline rapidly if and when a recession comes. Despite the fact that many of the biggest
billion-dollar IPOs of 2019 have fizzled out, there have been some winners. For example, Beyond Meat, the plant-based
meat company, went public back in May. Since then, its stock has been on a wild ride,
rising more than 240% over the summer. Beyond Meat’s share price has fallen since
then, but it’s still up more than 25% since the company’s IPO. In the third quarter of 2019, Beyond Meat’s
sales jumped 250% and the company reported its first-ever profit, which is far more
than many of 2019 IPOs can claim. The bottom line is that IPOs can be exciting
events for companies, but investors should know that just because there’s a lot of hype
around a company going public, it doesn’t necessarily mean that the company’s stock
is going to perform well right out of the gate or over the long term.
Thanks for watching this video! Do you think that 2019’s
billion-dollar IPOs will bounce back? Let us know in the comments below. If you liked this video, hit the
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6 comments

  1. The biggest flops, way to high valuation for something that may never be profitable have 1 thing in common: millennial CEO's – the best example being the WE company….

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