The Biggest IPO Flops and What Went Wrong

1. WeWork (2019) – The Spectacular Collapse of a $47 Billion Unicorn

WeWork’s planned IPO in 2019 was one of the most anticipated—and disastrous—in history. Initially valued at $47 billion, the company withdrew its IPO after investors scrutinized its financials, governance, and business model.

What Went Wrong?

• Unsustainable Business Model: WeWork leased office spaces long-term and rented them short-term, relying on continuous funding to cover losses.
• Corporate Governance Issues: Former CEO Adam Neumann’s erratic behavior, self-dealing transactions, and excessive control (via super-voting shares) alarmed investors.
• Massive Losses: The company lost $1.6 billion in 2018, raising doubts about profitability.
• Failed Valuation: Investors realized WeWork was a real estate company, not a tech firm, leading to a valuation crash to below $10 billion.

2. Uber (2019) – A Disappointing Debut for the Ride-Hailing Giant

Uber’s IPO was one of the largest in tech history, raising $8.1 billion at a $82.4 billion valuation. However, shares dropped 7.6% on the first day and continued declining.

What Went Wrong?

• Overvaluation: Investors questioned whether Uber could ever turn a profit given its heavy losses ($3 billion in 2018).
• Regulatory Risks: Legal battles over driver classification (employees vs. contractors) and bans in some cities created uncertainty.
• Competition: Rival Lyft had just IPO’d, saturating the market with ride-hailing stocks.
• Leadership Scandals: Former CEO Travis Kalanick’s controversies damaged investor confidence.

3. Lyft (2019) – First to Market, First to Fall

Lyft beat Uber to the public markets but struggled immediately, with shares dropping nearly 30% within months.

What Went Wrong?

• Profitability Concerns: Lyft lost $911 million in 2018, with no clear path to profitability.
• Price War with Uber: Both companies burned cash on driver incentives and discounts.
• Lockup Expiration: Early investors dumped shares when lockup periods ended, crashing the stock.

4. Snap Inc. (2017) – The Social Media IPO That Fizzled

Snapchat’s parent company, Snap Inc., went public at $17 per share, valuing it at $24 billion. Despite a strong debut, shares plummeted due to slowing growth and competition.

What Went Wrong?

• Facebook Competition: Instagram copied Snapchat’s Stories feature, stealing users.
• Weak Monetization: Advertisers found Snap’s platform less effective than Facebook or Google.
• User Growth Decline: Daily active user growth slowed, spooking investors.
• Corporate Missteps: Snap’s redesign in 2018 alienated users, worsening performance.

5. Blue Apron (2017) – A Recipe for Disaster

Meal-kit company Blue Apron IPO’d at $10 per share (down from an initial $15-$17 range) and collapsed soon after.

What Went Wrong?

• High Customer Acquisition Costs: Marketing expenses were unsustainable.
• Amazon Threat: Amazon’s acquisition of Whole Foods and entry into meal kits scared investors.
• Operational Issues: Delivery delays and fulfillment problems hurt customer retention.

6. Facebook (2012) – A Rocky Start for a Tech Giant

Though now a success, Facebook’s IPO was marred by technical glitches and a 50% stock drop in months.

What Went Wrong?

• Nasdaq Glitches: Trading delays caused confusion and losses.
• Overvaluation: Concerns about mobile monetization led to skepticism.
• Lockup Expiry: Early investors sold en masse, driving prices down.

7. Groupon (2011) – The Daily Deal Disaster

Groupon’s IPO raised $700 million, but its business model quickly unraveled.

What Went Wrong?

• Unsustainable Model: Merchants hated deep discounts, and customers didn’t return.
• Accounting Tricks: The company used controversial metrics like “adjusted CSOI” to hide losses.
• Competition: Rivals like LivingSocial and direct deals from businesses eroded its edge.

8. Pets.com (2000) – The Poster Child of the Dot-Com Bubble

Pets.com became infamous for its rapid rise and collapse during the dot-com crash.

What Went Wrong?

• No Profitability Plan: It spent heavily on ads but lost money on every sale.
• Logistics Costs: Free shipping on heavy pet food was financially ruinous.
• Market Timing: IPO’d just before the dot-com crash, sealing its fate.

9. Zynga (2011) – The Gaming Company That Lost Its Edge

Zynga, maker of FarmVille, IPO’d at $10 per share but quickly declined.

What Went Wrong?

• Overdependence on Facebook: Policy changes hurt its viral growth.
• Declining User Engagement: Players moved on from its games.
• Lack of Innovation: Failed to produce new hits post-IPO.

10. Beyond Meat (2019) – The Plant-Based Hype Fades

Beyond Meat surged post-IPO but later crashed due to competition and slowing growth.

What Went Wrong?

• Competition: Impossible Foods and traditional meat companies entered the market.
• Supply Chain Issues: Struggled to meet demand, then faced oversupply.
• Profitability Concerns: High production costs kept margins thin.

Key Lessons from These IPO Failures

• Valuation Matters: Overhyped companies often disappoint.
• Governance is Critical: Poor leadership can doom even promising firms.
• Sustainable Models Win: Profitability must outweigh growth at some point.
• Market Timing is Key: IPOs during downturns or hype cycles often backfire.

By examining these failures, investors and companies can avoid repeating history’s biggest IPO mistakes.