How the pandemic caused a corporate rebound
WeWork becomes a public company today worth more than $9 billion — a vindication of the expensive turnaround strategy employed after it spectacularly imploded in 2019. Like many companies that find themselves at death's door, that which didn't kill them made them stronger.
Why it matters: Hertz, Alamo Drafthouse, Airbnb, and Toast are among the currently-thriving companies that were shaken to the core in the early days of the pandemic — providing further evidence for the theory that, in the words of former Fast Company editor Bill Taylor, "companies can't be great unless they've almost failed."
The big picture: Companies that have returned more than 10,000% over 30 years — "superstocks," as they were christened by fund manager William Bernstein of Efficient Frontier Advisors — all tend to crash at least once along the way.
- Buying Apple stock 30 years ago would have been a fantastic investment, for instance: A $100 investment in October 1991 would be worth some $40,000 today.
- It was a very bumpy ride, however: The same $100 would have been worth just $26.75 at the end of 1997.
Where it stands: The pandemic dealt a near-fatal blow to many companies, especially in the services sector, which were then forced to retrench and rationalize.
- Airbnb was forced to lay off a quarter of its workforce when the pandemic hit, after "everything stopped working at the same time," according to its CEO. It then went public at the end of 2020, and is now worth more than $100 billion.
- Hertz and Alamo Drafthouse both went through cleansing bankruptcies before emerging as stronger versions of their former selves, no longer burdened with legacy debts and unwanted properties.
The bottom line: If great success comes out of abject failure, then most of the time it arrives after idiosyncratic disaster — think the Qwikster debacle at Netflix, for instance, which caused its stock price to fall 77% in four months.
- The pandemic, by contrast, was systemic, hitting thousands of companies simultaneously. That's caused a rare event: Many companies (think Toast) are now soaring up the stock charts as part of a broad-based post-pandemic rebound from deep crisis lows.