Tech companies are in flux: many high-profile tech companies are announcing either a job cut or impending bankruptcy.
- Last I posted, it was about WeWork’s IPO to bankruptcy announcement.
- And just this week alone, we witnessed yet another high profiled tech startup announced a job cut. A London ed tech startup boasting to teach STEM via cloud computing is laying employees off, again.
- Uber lost over $5.2 billion (yes, BILLION) in a single quarter alone (tapping into the US$22 billion raised from investors). Lyft is doing something similar.
- Snap Inc (owner of Snapchat) is also rapidly running out of funds (despite its US$24 billion listing in 2017).
If we truly were in good times, why would there be such a drastic need to cut jobs, tap into reserve fundings, or even file for bankruptcy?
Just earlier this month, Goldman Sach, an investment bank with a strong line of equity researchers, has issued a warning that the technology stocks are overvalued at the moment. We saw this happen in 2001 during the dot com burst and the 2007 prime mortgage, where equity researchers also hinted over valuation, but was largely ignored by the market.
Even in the links above, it was mentioned that the companies are still holding on, but with a condition: that the market still continues to believe in the value that they bring. So, when the market finally sees the discrepancy (as we did with WeWork’s potential IPO to bankruptcy – see my last post), will the tech bubble burst? Or do you think this is a time with some bad apples jumping onto the bandwagon of calling themselves “tech” companies but have nothing to substantiate themselves with?
Reference:
https://www.theverge.com/2019/8/8/20793793/uber-5-billion-quarter-loss-profit-lyft-traffic-2019
https://www.bloomberg.com/news/articles/2018-10-09/snap-s-cash-drain-is-becoming-a-big-problem-analyst-says
That is, in fact, a very interesting point.The data you brought up shows that “the bubble,” as you call it, is bursting. I guess, many saw it coming, no? On the other hand, it is good to point out that “what is an actual reason it is happening” ? Because, from what I understood, there is the consequence, but what is the cause ?
Definitely! And even if there is a technology burst, it will most definitely not be as impactful or detrimental as the 2000 Dot-com bubble! 🙂
Uber and snapchat lost a lot of their founds just due to bad really menagement. For example, snapchat now is completely dead. None of my friends use it and it is all beacouse snapchat itself has nothing unique to offer as for now all of it features were taken over by facebook. When it comes to bubble i completely agree with you and we should be very careful especially when we are stock traders or investors. There is huge competition and as acces to the internet progresses more and more people have the ability to create their own ideas and sturtups. Can relate as I’m working on a project myself and I know how hard is to fin a nische. Good blog!