WeWork, Lyft, Uber, Peloton: To their early backers, these are companies that would transform the way the world works, works out or gets around.
To public stock investors, they are companies with inflated valuations and real questions about when they will start making money.
The two views have collided this year, disastrously in WeWork’s case. After it failed to sell its stock to the public last month, throwing its funding plans into disarray, the company was bailed out last week by SoftBank, its largest outside investor.
SoftBank’s takeover values WeWork, which leases office space to co-working tenants, at about $7 billion. That is a far cry from the $47 billion that the company was valued at in January.
WeWork might be the most extreme example of the rebuke that public stock investors have delivered to high-flying startups, but it is hardly alone.
Across Wall Street, in Silicon Valley and at some of the world’s largest companies, a reckoning is unfolding as valuations slide for the so-called unicorns — startups worth at least $1 billion — that everyone was once so eager to buy.
Since going public this spring, Lyft and Uber have shed about $40 billion in market value and are trading well below their private market valuation. SmileDirectClub is trading at about half of its IPO price, and Peloton about 23% below its debut.
And since 2011, one-third of startups valued at $1 billion or more priced their IPOs below where they were in their last round of private fundraising, according to data provider PitchBook. A year later, nearly 40% of the unicorns that have gone public are valued at less than their final private market value.
Even before WeWork was bailed out, its struggle to go public had caused some of its early investors to write down the value of their...
