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Peloton is the latest in a line of IPO flops and failures this year. Here are 5 of the biggest.

Sep 27, 2019, 21:34 IST

Peloton

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Peloton's stock plunged 11% on its first day of trading.

The connected-fitness startup joins Uber, Lyft, WeWork, and Endeavor on the list of high-profile IPO flops and failures this year.

Here's a look at each of them:

Peloton's stock slumped 11% on its first day of trading this week.

The connected-fitness startup, which makes indoor bikes and treadmills and streams virtual exercise classes, was seeking a public valuation of about $8 billion — roughly double the $4 billion it was privately valued at in August 2018.

Peloton more than doubled its sales to $719 million in the year to June 30, but its operating losses roughly quadrupled to $202 million over the same period, its IPO filing showed. Even with its rapid top-line growth, investors may have shied away at valuing the company at more than 11 times its revenue.

WeWork shelved its IPO at the last minute due to a lack of investor interest.

Investors balked at the shared workspace group's business model, valuation, complex structure, questionable governance, and controversial cofounder and CEO Adam Neumann.

WeWork signs long-term leases for properties, divides them up and renovates them, then rents them out on a flexible, short-term basis. Investors questioned whether that strategy would hold up during a downturn if tenants moved out or demanded cheaper rents to stay.

Just before its IPO, WeWork was targeting a public valuation below $20 billion — less than half the $47 billion it was privately valued at in January. Another factor in its decision to delay was the risk of raising less than $3 billion, the amount needed to unlock $6 billion in bank financing.

WeWork's IPO filing showed Neumann commanded the lion's share of its voting rights, giving him almost total control of the company. It also revealed Neumann employed and gave paid gigs to immediate family members, charged WeWork nearly $6 million for the rights to the "We" name, and held stakes in companies leasing four buildings to WeWork, raising conflict of interest concerns.

Neumann's reportedly raised $700 million by selling and borrowing against his WeWork shares, allegedly smoked weed on a private-jet flight from New York to Israel, and has behaved in other questionable ways that tempered investor interest.

The company recently replaced Neumann with two co-CEOs, reduced his control of the company, and took other steps to improve its corporate governance.

Following Peloton's weak debut, Endeavor scrapped its IPO a day before it was scheduled to take place.

The owner of Hollywood talent agency WME, media giant IMG, and mixed martial arts body UFC originally planned to raise more than $600 million. It dropped its pricing range from $30 to $32 to between $26 and $29 a share, then pulled the offering entirely a few hours later.

Endeavor's revenue grew 27% to about $2 billion in the year to June 30, helping it narrow its net losses by 52% to $193 million over the same period, according to its IPO filing.

While its targeted public valuation doesn't look too lofty at less than a third of its first-half revenue, investors may have been turned off by net losses in four of the last five years.

Uber's shares slid more than 7% on the day of its IPO in May, and have fallen more than 30% to trade at around $31.

The ride-hailing giant has tried to appease concerns about its toxic culture by replacing CEO Travis Kalanick with Dara Khosrowshahi. However, its mounting losses, media reports of crimes occurring in its cars, and mounting regulatory pressure to treat its drivers as employees instead of independent contractors have weighed on its stock.

Uber's revenue grew 17% to about $6.3 billion in the first half of this year, according to its latest earnings report. However, it posted a net loss of $6.3 billion — a sharp swing from its net income of $2.9 billion in the same period last year.

The group's market capitalization of $53 billion values it at close to five times revenue and more than 50 times net income last year, meaning it's still aggressively valued despite its stock decline this year.

Lyft listed its shares at $71 in April. The ride-hailing group's stock has plunged by about 40% to $42 since then.

Like Uber, Lyft is battling regulatory pressures and questions about its profitability. Moreover, it was recently slapped with a lawsuit by 14 women accusing it of not addressing a "sexual predator crisis" among its drivers.

Lyft grew its revenues by 82% to $1.6 billion in the first half of this year, but its net losses soared more than four-fold to about $1.8 billion, according to its latest earnings report. Regardless, its current $12 billion market cap values it at more than six times revenue — an aggressive valuation for any company.

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