13REMARKS Bloomberg Businessweek October 7, 2019
Sometimes the companies’ founders
don’t even survive the transition from
private to public; Uber’s Travis Kalanick
and WeWork’s Adam Neumann were
bounced from the top job at their start-
ups amid heightened scrutiny of their
management skills.
The result is unicorn blood in the
streets. Office-sharing behemoth
WeWork’s parent, We Co., canceled its
planned initial public offering. So did
Hollywood talent agency Endeavor
Group Holdings Inc. Airbnb Inc. may
try a different route, allowing its inves-
tors to cash in by directly listing shares
on the market rather than attempting
to raise fresh capital through a conven-
tional IPO, Bloomberg News reports.
We Co. has turned into the poster
child for wounded unicorns that come
to Wall Street offering promises of dis-
ruption, with visions of stock mar-
ket capital in their heads. “WeWork’s
planned IPO turned into a highly pub-
licized debacle that suggested public
investors may finally be done over-
paying for blazing-fast growth,” IPO
specialist Renaissance Capital wrote in
a note summing up the third quarter.
It’s far from the only disappointment.
Companies such as Uber Technologies,
Lyft, and Peloton Interactive were
able to get their IPOs off the ground,
but the shares are trading well below
their initial offering prices. The FTSE
Renaissance US IPO Index of compa-
nies that went public in the past two
years started off 2019 with a bang, out-
performing the broader stock market,
but it’s lost 15% from its high in July.
Among the biggest unicorn vigilantes
are the people who control the mem-
bership of benchmark stock indexes.
Because of a change in rules in recent
years, companies with multiple share
classes can’t be added to indexes main-
tained by S&P Dow Jones Indices LLC
and face restrictions at FTSE Russell.
Among the companies affected are 7 of
the 10 biggest IPOs in 2019, including
Chewy, Lyft, and Pinterest, according to
Goldman Sachs.Notbeinginanimport-
ant index meansthosestockswillbe
ignored by mostpassiveinvestors whorepresent more than half the money in
U.S. mutual funds and exchange-traded
funds. “Multi-class voting to insulate
management from its own shareholders
comes at a significant long-term cost,”
write Goldman’s equities strategists, led
by David Kostin.
Recent market and economic trends
are also having an impact. President
Trump’s trade war and impeachment
inquiry, upside-down portions of the
Treasury yield curve, and reports show-
ing that global manufacturing industries
are shrinking have led to increasingly
nervous speculation about a reces-
sion. That’s not the ideal environment
in which to ask investors to take on a
lot of risk by buying into an IPO, espe-
cially from an unprofitable company.
The best-performing sectors in the
S&P 500 in the third quarter were util-
ities, real estate, and consumer-sta-
ples companies—famous for their high
dividend yields and/or relatively safe,
steadybusinesses,ratherthanblock-
bustergrowthanddisruption.
ssiveinvestors,who SomeSome investorsinvestorsalsoalso pointpoint totoaa