History cases of companies that failed (and why)
- Jose Heredia
- Sep 17
- 5 min read
When investing in the stock market, it's common to get caught up in the excitement of the moment: a new product that revolutionizes the market, headlines in the media, or a piece of "advice" that sounds too good to ignore. However, history is full of examples of companies that seemed like investment gems and, over time, turned out to be a great lesson in risk.
In this article, we review some of the most emblematic cases, explain which warning signs were overlooked, and what we can learn to make better decisions in the future.
Let's look at some of the most emblematic cases of companies that failed
1. When innovation goes up in smoke: Theranos
In the mid-2010s, Theranos promised a revolution in the healthcare world. Its founder, Elizabeth Holmes, claimed that its technology could perform comprehensive blood tests using just a drop of blood. Renowned private investors and prominent political figures joined the euphoria.
What went wrong
Clinical studies never demonstrated that the technology worked. The company avoided independent audits and presented unclear data to investors. In 2015, journalistic investigations revealed that the tests were conducted using traditional methods and that Theranos' machines were unreliable.
The lesson
The promise of "revolutionary technology" can cloud judgment. Before investing in a company with a disruptive proposition, it's important to check for independent testing, solid patents, and scientific validation. "Too good to be true" is often a big warning sign.
2. The giant that ran out of energy: Enron
Enron was one of the most admired energy companies in the 1990s. Its growth seemed unstoppable, and its executives were Wall Street celebrities. Investing in Enron was considered a safe bet.
What went wrong
The company used complex accounting structures to hide multi-million-dollar debts. When auditors and the market discovered the deception, the stock, which had been trading around $90, fell to less than $1 in a matter of months. Thousands of employees lost their jobs and their retirement savings.
The lesson
Financial statements can be manipulated. It's important to review not only the quarterly results, but also the quality of the audits, the financial statement notes, and the transparency of management. If a company is opaque with its information, it's a sign of risk.
3. El espejismo de las “puntocom”: Pets.com
In the late 1990s, the internet boom attracted thousands of investors to any business with ".com" in its name. Pets.com, an online pet supply store, captured the public's imagination with its friendly mascot in Super Bowl ads.
What went wrong
The business model wasn't profitable: shipping and marketing costs far exceeded revenue. In less than a year, the stock, which had been listed at $11, ended up being worth pennies. The collapse became a symbol of the dot-com bubble.
The lesson
Media popularity is not synonymous with profitability. Before investing, it's important to review whether the company has a realistic path to profit and whether its customer acquisition costs are sustainable.
4. The local case that surprised Mexico: Oceanography
In 2014, the oil services company Oceanografía was considered an important partner of Pemex. It had multi-million-dollar contracts and a booming corporate image.
What went wrong
It was discovered that he had falsified contracts to obtain financing from Banamex. When it came to light, the scandal hit not only the company but also the financial institutions involved. Oceanografía went bankrupt.
The lesson
Even companies with large clients or government support can fall if their management is unethical. It's vital to look not only at the numbers, but also at the reputation of their managers and the transparency of their processes.
5. The photography giant that failed to reinvent itself: Kodak
For decades, Kodak dominated the photography market. However, when digital photography arrived, the company was slow to adapt.
What went wrong
Despite having developed digital technology in its laboratories, the company didn't invest in it in time, fearing it would cannibalize its film business. By the time it wanted to react, more agile competitors had captured the market.
The lesson
Even iconic brands can lose relevance if they don't innovate. For investors, this demonstrates the importance of assessing a company's ability to adapt to technological and consumer changes.
6. The Biotech Mirage: Valeant Pharmaceuticals
Valeant (now Bausch Health) was, for years, the star of Wall Street. Its strategy of buying small pharmaceutical companies and raising drug prices drove its stock from $14 to over $250.
What went wrong
Regulatory pressure, accusations of abusive practices, and a massive debt structure have decimated the company's value. In less than a year, the stock lost more than 90% of its value.
The lesson
Explosive growth driven by price increases or debt can be unsustainable. It's important to analyze whether a company's profits stem from lasting competitive advantages or from practices that are difficult to sustain.
7. WeWork and the allure of “unicorns”
When WeWork announced its IPO in 2019, its valuation was around $47 billion. Its coworking space model seemed like the new frontier for offices.
What went wrong
Investors discovered the company was suffering from massive losses and a weak corporate governance structure. The IPO was canceled, and years later, its value fell to a fraction of its value.
The lesson
Startups with great marketing can hide profitability and control issues. Before investing, you should look at the quality of management and the clarity of their business model.
Repeating patterns
Although these cases belong to different industries and eras, they share identifiable traits:
Excessive rapid growth without a solid business model.
Lack of information, with difficult-to-verify data or complicated accounting structures.
Excessive reliance on trends or hype, where narratives outweigh numbers.
Weak corporate governance, lacking adequate controls or transparency.
Disconnection from market reality, such as unsustainable costs or resistance to innovation.
Recognizing these patterns doesn't mean shying away from all growth opportunities, but rather investing with a healthy degree of skepticism.
How to protect yourself as an investor
Read beyond the headlines. Don't just read the news or what's being said on social media.
Review the quality of the audits and who signs the financial statements.
Compare key numbers (margins, cash flow, debt) with companies in the same sector.
Observe the track record of management. Their decision-making history speaks volumes.
Be patient. If an opportunity seems urgent and everyone is running after it, it's worth stopping and analyzing.
Conclusion
The market will always have stories of “the next big thing.” Some are truly that, but others end up being just “cases of companies that failed miserably” and become costly reminders of why caution is a virtue in investing. Analyzing cases like Theranos, Enron, Pets.com, Oceanographia, Kodak, Valeant, and WeWork reminds us that behind every spectacular growth chart, there must be a sustainable business, with transparency and the ability to adapt.
The next time you hear “this stock is a safe bet,” remember these lessons. Sometimes, the best investment decision isn't to jump in… but to wait for the hype to subside and the fundamentals to speak.
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