Rising interest rates, a war in Ukraine and other factors drove the S&P 500 officially into bear market territory on Tuesday—when a market is down 20% or more from a recent all-time high—worsening fears of a recession as the government takes more aggressive measures to control runaway inflation.
And that could hit San Francisco firms particularly hard. The tech-focused Nasdaq index is down around 28% since the beginning of the year, and local companies are no exception: SF-based public companies with at least $1 billion in market capitalization have seen their shares plummet by 44% on average since the beginning of this year.
Shares in Affirm, which offers buy-now, pay-later services, have fallen by more than 80% year to fate amid a broader decline in e-commerce. The ten companies that have seen the greatest declines this year are all tech firms, including Affirm, Lyft and Asana. The market downturn has also impacted other local industries like apparel, with shares in the Gap and Levi Strauss & Co down more than 30%.
The downturn could trigger cost-cutting at companies that enjoyed a long stretch of market growth and low interest rates during the pandemic. Twitter, Uber and other firms have already implemented hiring freezes this year.
“When the heat is on to achieve profitability or the heat is on the market to come up with reasons to buy their stock, we see companies become more cost-conscious,” San Francisco City Economist Ted Egan said last month. “That means implications around hiring, real estate and a bunch of other things that can affect the local economy.”
The only San Francisco-based company with at least $1 billion in market capitalization that has seen its share price rise from the beginning of the year is Anaplan, an enterprise technology company that sells business planning software.
However, the company’s share price was buoyed by a $10.7 billion transaction with private equity firm Thoma Bravo, which valued the company at $66 per share. The stock is currently trading at around $63 a share, with a deal to take the company private expected to close by the end of the month.