This was supposed to be the year when America’s biggest start-ups would finally make their triumphant debut on the stock market.
Billionaire Silicon Valley investors, sneaker-clad founders and button-down bankers all expected enormous stock sales to turn companies like Uber, Lyft and WeWork into a new generation of corporate giants.
It hasn’t quite turned out that way. Last week, WeWork postponed its planned initial public offering. Uber and Lyft sold shares earlier this year only to see their prices collapse. On Thursday, Peloton joined the list as its shares slumped in their first day of trading. Investors took a look and backed away, seeing overpriced companies with no prospect of making money any time soon, in some cases led by untested executives.
The rejection threatens Silicon Valley’s favored approach to building companies. The formula relies on gobs of money from venture capitalists to paper over losses with the expectation that Wall Street investors will eventually buy shares and make everybody rich. If mutual funds and pension funds are no longer willing to buy once the companies go public, fledgling companies are unlikely to find funding in the first place.
“When the I.P.O. market is hurting, it has a domino effect on valuations and venture capital deals,” said Steven N. Kaplan, a professor of finance and entrepreneurship at the University of Chicago. If it persists, that could make it harder for start-ups to raise money, he said.
Much of the recent concern has been directed at WeWork, a shared office space company based New York. As it began to approach stock market investors, the company revealed losses of $1.37 billion in the first half of 2019. Investors also questioned financial dealings of WeWork’s chief executive, Adam Neumann, and the company’s accounting.
On Tuesday, Mr. Neumann stepped down under pressure from directors and investors. It is now uncertain when the company will return to the market.