Most businesses aren’t making money when they first open their doors.
Indeed, many publicly-traded companies are losing money when they first hit the stock market. That’s actually why many come to the stock market. They IPO to raise investment capital while offering prospective investors the opportunity to get a piece of a company before it starts minting money.
These companies include small intenet startups and biotech firms.
Let’s not forget about the many companies that are losing money because business stinks. In parts of the world where economic activity is contracting, you’ll easily find banks, homebuilders, and commodities suppliers booking losses.
But the number of money-losing public companies may surprise you.
Societe Generale’s Andrew Lapthorne offered this interesting chart tracking the percentage of loss making companies in the U.S., the eurozone, and Japan.
“What is interesting is that not only have loss making companies become more common in the eurozone and US, but how increasingly rare they have become in Japan,” Lapthorne wrote. “In addition, while US loss makers tend to come from speculative growth sectors, in the Eurozone, after biotech, the loss makers are mostly in banks, construction and real estate.”