IPO flops and non-starters show investor vigilance, billionaire Howard Marks says

Tokyo — WeWork’s failure to go public and 2019’s disappointing tech initial public offerings (IPOs) in the US are a positive sign of market discipline and investor vigilance, Oaktree Capital’s billionaire co-chair Howard Marks said.

WeWork abandoned plans for an IPO on September 30 as investors questioned the office-sharing start-up’s growing losses, its business model and corporate governance.

It followed some high profile US IPO flops including that of Uber, Lyft and Peloton.

“I think it was a success for the market. This is a positive sign that the market is behaving as it should,” the veteran investor said on Wednesday. He said, however, that he did not think markets were in a bubble.

“This is a low-return world. Asset prices are high but not absurd. Too much money chasing too few deals,” he said.

“I don’t think we’re in a bubble. I don’t think the conditions today are extreme or crazy … I don’t think we have to have a meltdown or a crash.”

Marks, known in investment circles for his memos to clients, which he has been writing since the 1990s, said Oaktree’s portfolio currently takes a “moving forward with caution” approach. He added that the asset manager was trying to be fully invested every day but with caution.

The distressed debt guru singled out China for bargains, adding that some of the Latin American countries that have gone through political or economic difficulties were also attractive.

“There is hesitation to invest in China and the rest of the emerging markets. In my experience, which now spans 50 years, you make big money when you do things that other people don’t want to do.”

The Los Angeles-headquartered global alternative asset management company manages $122bn with a focus on distressed debt and credit opportunities, real-estate and private equity.

Reuters