The U.S. stock market wrapped up its worst first half since 1970 on Thursday, falling 21.1% since the year began and exposing investors in overvalued growth sectors to severe losses.
Of the 1,625 companies with market values exceeding $2 billion, 138 have lost at least half of their values so far this year, according to Factset data. Mid-cap stocks with market valuations between $2 billion and $10 billion generally have less survival risk than small caps and more growth potential than more entrenched large companies, but more household names are falling into this range and their performance is trending in the wrong direction. That includes trendy upstarts that have gone public since 2019 like Peloton, Asana and Affirm which are all struggling to impress investors this year.
Peloton was one of the biggest winners of 2020, when work-from-home white collar Americans bought its stationary exercise bikes and subscriptions in droves while gyms were closed during pandemic lockdowns. The stock rose almost sixfold from its September 2019 IPO at $29 per share to a peak of $167 in January 2021 after the company recorded its first two profitable quarters to wrap up 2020.
Since then, the reopening of offices and gyms have prompted Peloton’s stock to spiral. Cofounder John Foley stepped down in February and Peloton laid off 20% of its workforce, with Spotify and Netflix veteran Barry McCarthy brought in to try to right the ship. Peloton reported a 23.6% revenue decline in the first three months of this year and a net loss of $757 million, with excess inventories that it’s struggling to sell. With only $879 million in cash on hand at the end of the quarter, McCarthy wrote in a shareholder letter that the company is “thinly capitalized for a business of our scale” and borrowed $750 million from JPMorgan and Goldman Sachs to strengthen its balance sheet. Shares are down 94.5% from their peak and 74% this year, closing Thursday at an all-time low of $9.16.
Affirm, the buy-now, pay-later (BNPL) startup which offers interest-free pay schedules on some purchases and counts Peloton as its largest retail partner, has fared even worse this year. Its stock is down 81%. The fintech firm went public in January 2021 and has never been profitable, posting a net loss of $54 million in the first quarter of the year, and Apple launched a BNPL service to directly compete with Affirm this month. Swedish competitor Klarna, still a private company, is reportedly considering raising cash in a down round at a $15 billion valuation, two-thirds lower than its $46 billion valuation a year ago.
Fintech lending platform Upstart Holdings, which uses artificial intelligence to evaluate borrowers’ creditworthiness, has also fallen victim to rising interest rates, with shares down more than 90% from their peak last October. Upstart crashed 56% in one day on May 10 when it reported earnings and cut its full-year revenue expectations to $1.25 billion from $1.4 billion.
Online used car dealer Carvana, known for its car vending machines, has been the worst performer of any company worth at least $2 billion this year, cratering 90% in the first half. It laid off 2,500 employees in May, 12% of its workforce, and has been marred by delivery delays and paperwork problems, in some cases selling cars without titles. Its CEO Ernest Garcia III and his father Ernest Garcia II had combined fortunes of $23.3 billion on last summer’s Forbes 400 list, but that has declined to $4.5 billion now and would be much lower if not for some well-timed stock sales last year. No other company worth more than $400 million has declined as much as 90% this year, according to Factset data–Carvana’s market value still sits at $4.3 billion.
SPAC deals have generally underperformed the market as well, none more significantly than MSP Recovery, which aims to identify Medicare and Medicaid claims that should have been paid by other insurers and pursue lawsuits and settlements. It generated just $14.6 million in 2021 revenue but purported to be worth $32.6 billion when it agreed to merge with Lionheart Acquisition Corp. II. That has declined to a $6.8 billion market value as of Thursday’s close, but it’s more than doubled since its June 13 low. CEO John Ruiz and chief legal officer Frank Quesada provided a personal $113 million loan to the company on June 16, according to an SEC filing.
These are the 10 U.S.-listed stocks with market capitalizations currently between $2 billion and $10 billion that have fared the worst this year.
The only large-cap companies (worth at least $10 billion) that have done as poorly as the firms on this list are Coinbase (-81%), Shopify (-77%) and Rivian Automotive (-75%).