• Triton

The biggest loser today is WeWork

Two points make a line.

And now we know that whatever the relative quality differential between Lyft and Uber, the jury is in that large, hyper-capitalized tech companies with opaque fundamentals and colossal losses are very difficult to take public.

Both deals got done, which is not nothing, but discovering the correct price and floating the shares without tumult has now defied two syndicates of highly-competent Wall Street underwriters.

Doing this right is obviously very very hard.

WeWork recently announced it had filed to go public later this year and we can now safely wonder if they will have the courage to go through with it. With $1.9 billion of losses on $1.8 billion of trailing revenue, WeWork’s loss profile is even worse than Lyft’s, bearing a closer resemblance to Snap’s revenue-to-EBITDA gearing at IPO – which was $404 million of revenue and negative EBITDA of $459 million (and worsening in dollar terms since). And as far as understanding the financials, many smart investors are at a loss to compute how adding beer and ping pong gives WeWork its multiple premium over other office-leasing participants.

If rumors are true that Airbnb will pursue a direct listing, as Spotify and now Slack have done, they may save themselves the pain and suffering Uber and Lyft have endured entering public markets with so much turbulence. However, WeWork doesn’t seem to have the benefit that we can now see Slack enjoys: years of runway in cash on its balance sheet.

Both Uber and Lyft needed proceeds from their IPOs, even if it turns out those proceeds will only add two to three years of runway against current loss rates. WeWork seems to be similarly situated.

The Monday-morning quarterbacks will now commence tearing Uber’s IPO apart and noting all the reasons we should have seen this coming from miles away. And no doubt some of that analysis will seem obvious and right in narrow and specific ways.

But whatever the reasons for today’s mess – starting and ending around $42 per share – it is fair to say they weren’t totally obvious to the very sophisticated investors who bought billions of dollars of stock at $45 per share just yesterday. This outcome was hard to predict, and the larger lesson is that huge losses combined with opaque financials that are impervious to thorough analysis and forward modeling make these mega-cap startups very difficult to value.

It may not matter in the long run for the ones that are out. Uber and Lyft and even Snap are public companies now. And maybe Uber will get a mulligan from market-watchers who – despite the really grim aesthetics of the day-one price chart – will chalk it up to Trump and Twitter and China and a generally adverse tape.

But for the ones in the IPO pipeline, today will matter.

For the next Pinterest or Zoom or Docusign or Elastic or Zscaler, investors may not have flashbacks to this pattern of hitting potholes and blowing tires on the way into the public market – those deals will keep coming, and the good ones will do well.

But for the mega-caps – namely Airbnb and WeWork – this is a real problem. Airbnb has signaled it may take a different route to liquidity, but it seems WeWork may need a new plan.