WeWork IPO failure a critical signal for markets: Morgan Stanley

This post was originally published on this site

https://i-invdn-com.akamaized.net/trkd-images/LYNXMPEF903EY_L.jpg

(Reuters) – WeWork’s failure to go public is a critical turning point for markets that signals the end of “the days of endless capital for unprofitable businesses,” Morgan Stanley (NYSE:) Equity Strategist Michael Wilson says.

He said in a note to clients dated Sept. 29 that it is reminiscent of other corporate events that marked the top of secular trends in the past 20 years.

Morgan cited three: United Airlines’ failed leveraged buyout in October 1989, which effectively ended the LBO craze of the 1980s; the AOL-Time Warner merger in 2000, which indicated the dot com bubble was coming to a close; and JPMorgan (NYSE:) Chase’s takeunder of the failed Bear Stearns investment bank in 2008, which signaled the end of the financial excesses of the previous few years.

“It was one heck of a run, but paying extraordinary valuations for anything is a bad idea, particularly for businesses that may never generate a positive stream of cash flows,” he wrote.

Getting back to a more disciplined mindset was a good thing, Wilson said, adding that some publicly traded stocks “still need to fall back to earth.” This downward adjustment was already happening and may not have much further to go, he said, but noted that these stocks also will come roaring back.

WeWork’s parent, The We Company, on Monday filed to withdraw its IPO a week after the SoftBank-backed office-sharing startup ousted founder Adam Neumann as its CEO. The scrapping of the IPO marks the conclusion of a tumultuous few weeks for the firm, which failed to excite investors who raised concerns about its burgeoning losses and a business model that involves taking long-term leases and renting out short-term space.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Add Comment