Bankers who in October suggested a $120-billion valuation for Uber Technologies Inc. have eaten their words, with the market cap falling to half that.
Wall Street experienced a miraculous rebound in early 2019, leading to all sorts of deals and arrangements that test the limits of risk tolerance.
“At some point, people are going to get burned,” said Marshall Front, the chief investment officer at Front Barnett Associates and a 56-year Wall Street veteran. “People want to take their companies public because they don’t know what the next years hold, and there are people who think we’re close to the end of the cycle. If you’re an investment banker, what do you do? You keep dancing until the music stops.
People see it like this: It’s been great until now. ... Should we do something now because the next few years are a question mark?After 2018’s traumas, credit markets also have reversed much of the carnage and rallied, giving license to companies to pick up the pace of borrowing. Junk bond issuance is now ahead of last year’s pace, according to data compiled by Bloomberg. Last week alone saw $12 billion priced, the busiest in 20 months.
Only in a few instances have investors extracted concessions from borrowers. Banks that financed the buyout of NSO Group — an Israeli spyware company accused of selling software to governments and agencies linked to human rights abuses — were forced to offer the debt at a steep discount to get it off their books, while Carlyle-backed ION Group this month dropped a planned $250-million dividend from a $2.2-billion leveraged loan sale, before ultimately opting to withdraw the entire debt deal.
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