Companies making their debut on the U.S. stock market are getting a rough welcome, especially if they are losing money, casting a shadow over the calendar for initial public offerings for the rest of the year.

The surprise postponement of the WeWork IPO has underscored how confidence is eroding in the market both for companies looking to raise capital and investors.

A more discerning market for IPOs continued to punish Peloton Interactive Inc on Friday, when shares of the fitness startup traded 15 percent below its Wednesday IPO price.

Before trading began on Friday, five of this year's eight deals of one billion U.S. dollars or more were trading below their IPO price, according to research firm Dealogic. On a broader scale, only about 27 percent of the 112 deals of 100 million U.S. dollars or more were trading below their IPO price.

Venture capital firms and other backers of many of these high profile "unicorns" - companies valued at one billion U.S. dollars or more in the private market - had a higher tolerance for the path to profitability, but eventually they wanted to monetize their stakes.

Investors get more selective

In the past, public market investors have typically expected companies to become profitable within 18 months or so of an IPO. This timeline has been relaxed with money managers eager to add businesses with fast-growing revenue to their portfolios.

Recent deals, however, suggest an uncertain economic outlook is pushing investors to be more selective about which loss-making companies they are willing to back.

Peloton reported rapid top-line growth of 110 percent during the fiscal year that ended June 30. But the company also showed negative operating leverage, with operating expenses surging 147 percent over the prior year.

Loss-making teeth-alignment company SmileDirectClub this month became the first U.S. IPO in three years to price above its target range and close down on its first trading day, according to research firm Renaissance Capital.

Average IPO return drops

Meanwhile, the average IPO return in 2019 was now about six percent at the end of trading Friday, down from more than 30 percent at the end of June and more than 18 percent about two weeks ago.

Taking a lesson from the struggles earlier in 2019 of ride-hailing companies Uber Technologies and Lyft Inc, which have no stated timetable for becoming profitable, investors have started to push back on companies with a history of steep losses.

"It will be a dialogue among bankers and boards and senior management teams where they say, 'these were isolated and not comparable,' or say 'we have a sentiment shift and we need to be more conservative and use a different strategy,'" said David Ethridge, U.S. IPO services leader at audit firm PwC.

(With input from Reuters)