2019 has been a rocky year for IPOs. Many fizzled out before they even made it public, most notably WeWork. Many of the ones that made it have struggled in their transition to public markets. Companies are staying private for longer than in the past, so companies are going public at higher valuations which bring more scrutiny, higher expectations, and an immediate pathway to profitability.
Sometimes, weak debuts can prove to be fantastic buying opportunities. An example is Facebook
In 2019, IPOs came from a variety of sectors, these are the worst:
SmileDirect Club
SmileDirect Club sells orthodontic teeth straighteners directly to customers for just under $2,000. The company was successful initially as it was able to deliver results at a much lower price than traditional orthodontists and greater convenience. However, the company's marketing is certainly deceiving as there several customers that it can't properly treat.
Its stock debuted just above $30 and has fallen more than 70% from these levels. The primary reasons are that its sales momentum is significantly slowing, and increased regulatory threat. For example in California and Georgia, SmileDirect Club has had to curtail its operations as the state mandates that a licensed dentist is on hand anytime a 3-D image is taken. Of course, this type of requirement undercuts SmileDirect's ability to offer lower prices. The company also faces a slew of lawsuits as well related to customers complaining of damages.
Lyft
Lyft had its IPO in March when it opened at $72. Currently, it trades at $45.5, a loss of nearly 40%. Lyft's major issue is its lack of profitability. Further, there is no real viable path to it in the near-term. Analysts don't think the company will hit profitability until 2023.
Its previous quarter showed a loss of $463 million on revenue of $955 million. Revenue growth was impressive at 80% from the previous year's quarter. Private markets are more receptive to these types of unprofitable but rapidly growing companies.
Uber
Uber is down more than 60% since its IPO in May. The major reason that Uber has underperformed Lyft is that Uber has expanded beyond ride-sharing in ways that haven't worked out yet. Uber Eats looked promising for some time, but its fortunes are dwindling with other food-delivery services.
Uber is valued like a tech company, but it's products are quite old-school like giving people rides or delivering food. These are labor and time-intensive tasks that can be marked up by a couple of bucks at most, and huge profits can only be made by winning market share and a huge number of transactions.
