Warren Buffett says the 'jury is still out' on companies that aren't making money

Eric Frances/Getty ImagesWarren Buffett talks to reporters at an annual Berkshire Hathaway shareholders meeting in Omaha, Nebraska.

At the Berkshire Hathaway annual meeting, CEO Warren Buffett said the wave of loss-making companies, many of which had recent IPOs, might actually work out. The answer came in response to a shareholder’s question about the prospects of companies like Wayfair, the online goods retailer, that pursue growth while posting losses.

“I think the jury is still out on whether on which the operations to which have grown very rapidly in size but are still incurring losses how they will do over time,” said Buffett, citing Amazon as a stunning success which had employed this model.

Recent tech initial public offerings such as Lyft and Pinterest have gone public in recent weeks, raising over $US1 billion each, despite posting significant operating losses. Trading has been mixed among the 2019 IPO class.

Loss-making IPO companies such as Beyond Meat and Pinterest have risen significantly from their IPO prices while Lyft, which is now trading below its IPO price, has struggled. All three companies have valuations in the billions of dollars despite no forecast of operating profits in the near-term.

Mega-tech “unicorn” Uber is expected to command a valuation of up to $US90 billion in an IPO planned for this year. Uber recorded a $US1.8 billion loss in 2018.

“Investors are willing to look at losses as long as sales are increasing and hope that there will be better days ahead,” Buffett added.

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