The chief strategist at a $1.2 trillion investing titan explains why pain for Uber, Peloton, and WeWork is good news for the stock market - and helping fend off another tech bubble
- WeWork's failed initial public offering attempt and the painful market debuts of highly valued, unprofitable companies like Uber and Lyft have raised questions about a new tech bubble.
- Invesco Chief Global Markets Strategist Kristina Hooper says she's glad the companies are being scrutinized. If the stocks were all soaring, a bubble would be far more likely.
- She adds that the tech companies of today are much stronger businesses overall than the most infamous participants of the dot com boom.
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It's easy to wonder if something is wrong with the stock market as one highly anticipated IPO after another lands on Wall Street with a thud.
For many investors and onlookers, the struggles of money-losing companies like Uber and Peloton - as well as the now-infamous WeWork debacle - have raised the question of whether a 1990s-style tech bubble might be rupturing.
But Kristina Hooper, chief global markets strategist for $1.2 trillion investing giant Invesco, says she's actually encouraged by the ongoing investor backlash.
"I've taken a lot of comfort from what's happening in the IPO market just because this feels very different than the IPO market of the late 1990s," she told Business Insider in an exclusive interview.
While investors who bought the stocks right after their market debuts can't be happy about how they've performed, Hooper says it's a good sign that Wall Street is taking a hard look at these companies instead of sending them all skyward.
While investors are upbeat about the potential of new technologies, she says they're not assuming all of the companies working with those technologies are bound for success. That unbridled enthusiasm is what made the tech bubble so dangerous, in her view.
"Today there isn't an assumption that every IPO is an exciting unicorn ready to run free," she said. "That suggests more discipline than what we saw in the late nineties. And I actually think that's a far healthier kind of environment."
It's unquestionably true that investors in the private market were willing to assign far greater valuations to these companies than the public has been. But Hooper says this doesn't reflect "irrational exuberance" that leads to bubbles as much as it reflects the amount of money that private equity investors have to spend.
"We have a lot of money flooding private equity and there's this conventional wisdom on the part of a number of investors that that's where the opportunity lies," she said. "When there's a lot of cash on hand, that's when valuations can get a bit out of whack."
While many investors still remember the losses they took when the tech bubble burst in 2000, Hooper notes that the enormous technological progress of the past two decades gives newer companies the ability to deliver much more than short-lived dot com era companies like Webvan, Global Crossing, or Pets.com could.
"Many of these companies, I would argue, are fundamentally better than the offerings we saw in the late 1990s," she said. "Anything that had a 'dot com' after it was entitled to a very high P/E, and that's just not the case today. Yes, companies are going public that aren't profitable, but they are far more developed than they were in the late 1990s."