Sky-high valuations on money-losing companies are souring the market for initial public stock offerings.
Many companies going public are not profitable.The disappointing debut of Peloton is part of a larger problem: sky high valuations and money losing companies.
First SmileDirectClub, than WeWork, then Peloton, then Endeavor, which today lowered both the amount of shares it was offering to sell tomorrow and the expected price. All disappointments. "The valuations are broken," Santosh Rao, Managing Partner at IPO research firm Manhattan Venture Research told me. "What are the bankers thinking? Private valuations are way out of sync with what the public is willing to pay."
"The markets are getting more skeptical of companies that can scale up but have no path to profitability," Aswath Damodaran, Professor of Finance at Stern School of Business, said on CNBC.
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