I mentioned on another thread that a record 60% of all (Russell 3000) listed companies in the US are profitless.
Many of them are important but not household names ( How many of GM’s or Apple’s parts suppliers can you name? How many utility companies or B-to-B companies can you name?)
Airlines and Cruise lines appear all over the list. It would be a very impressive and long list if I included those but that’s a bit of work so I will let you imagine them.
Below are 15 household-name companies that
not only have zero earnings
but also are so deep in debt, they could not pay their debts if they sold eveything they own,
and they have no collateral to get new loans.
Uber
Twitter
Warner Brothers
Roblox
Snap
Zendesk
Docusign
The Gap
Carvana
Shake Shack
Big Lots
Redfin
JOANN Inc
Red Robin
Atari
The 60% number is important, but if that does not resonate, maybe recognizing some names on this list will.
The list would be a lot longer if there were an easy way to include such thigs as
“Companies that have only $500,000 left and are losing $1 million a year.”
Perhaps I can find a way to add those names as well.
But this is the top 3000 publicly traded companies in the US, and Atari, a company that for all intents and purposes went out of business in the late 80’s, is on that list.
Atari’s main product (household gameboxes) disappeared in the 80s but they went on as a successful game developer working designing games for Xbox Playstation Inforgrames.
They had a big hand in some second-tier MMORPGs including
Neverwinter
Star Trek Online
City of Heroes/Villians &
Magic the Gathering
If they “don’t qualify” for my list, it is only because they stopped being a household name.
I watched Carvana come on the scene…those baaad car dealers was their theme. Choose your car out of their glass tower was one of their gimmicks. I read back in May that the father/son billionaire partnership had lost billions. Had they asked, I would have told them how difficult this endeavor is. I didn’t get that call until around two months ago when they asked to partner up in another endeavor marketing cars. I told them I wasn’t interested. Now I’m just waiting for their tree to fall.
What are the metrics used to determine that a company is a zombie company?
Depending on the metrics used, the numbers are anywhere from 18-60%. The consensus is 25%.
Still a very large number…less than two decades ago, the number was around 5%.
This is total companies in the US that I am talking about.
It’s a big problem…especially in the energy sector (which is why, BTW, that people who think “drill baby drill” will significantly lower oil prices are deluding themselves).
I called a zombie company a company with negative earnings
(a very big list. It includes 60% of all publicly-traded companies)
and then narrowed the list by including only companies that also have a
negative net worth (can’t survive by borrowing against equity when you have negative equity).
I then excluded
cruise lines and airlines (so many of those are zombie companies they would have dominated the list)
Ok the most common definition is a company that makes enough in cash flow to cover its operating expenses and debt service, but not the principal, so it must constantly refinance its debt in order to continue operating.
Are you sure 60% of all companies have actual negative earnings?
Start up companies often lose money.
Any given company can count last year’s losses this year.
Any company can count a loss in investment value this year or next year whichever they choose.
So “Company Z is losing money” is not alarming,
but when Bloomberg says 60% of the Russell 3,000 companies are losing money it is a very bad sign for the economy.
On average, S&P earnings decline 30% during a recession.
Current earnings estimates from the major Wall St firms average a forward looking decline of (only) ~2%.
I spoke with someone at DocuSign to ask them if they were able to incorporate Notary capabilities in documents.
They said that they could but only for very large corporations as the fees were astronomical.
For all of the research that they have done you would think that they could have expanded into that area for both large and small businesses and been able to make more money.
Atari, even more than Commodore, is a fascinating example of how a lack of discipline, of starting projects and never finishing them, can wreck a once prosperous company.
