Why Are So Many Companies Going Bankrupt In 2025? - David Friedberg

Large U.S. corporate bankruptcies reached 446 through July 2025, putting the year on pace for the highest total since 2010. The speakers argued this is less a sudden tariff shock than the delayed unwind of years of zero-rate financing that kept weak companies alive longer than their businesses justified.

The bankruptcy wave is concentrated in businesses that carried structural leverage long before 2025, especially retailers such as Joann, Party City and Forever 21. Physical retailers face both declining store traffic and lease obligations that behave like long-term debt, making higher rates especially punishing when already-thin businesses need refinancing.

Chamath Palihapitiya expects bankruptcies to rise further because cheap capital is disappearing while competition and M&A are becoming more aggressive. He described this “creative destruction” as ultimately healthy: failed companies release workers, capital and assets that can move into businesses capable of using them better.

Commercial real estate is the episode’s clearest systemic risk: roughly $2.2 trillion of debt is due before 2028, and refinancing now attacks properties from both sides. Higher rates can turn previously cash-flowing buildings negative, while lower valuations shrink borrowing capacity and force owners to inject fresh equity or surrender properties.

Banks and property owners have delayed that reckoning through “extend and pretend” restructurings because foreclosure crystallizes losses for both sides. The result is a stock of “zombie buildings” whose owners cannot justify investing in renovations even when lower-rent tenants exist, leaving economically usable space trapped behind broken capital structures.

San Francisco illustrates the reset still required: the speakers estimated roughly one-third of its real estate remains vacant, making new office construction hard to justify. Their proposed clearing mechanism is painful but simple—properties return to lenders, sell at lower prices, and new owners recapitalize them sufficiently to attract tenants again.

Despite the bankruptcy headlines, David Sacks did not see evidence of a broad economic collapse, pointing to 3.3% second-quarter GDP growth. His distinction was between a still-strong overall economy and severe weakness in sectors most exposed to refinancing costs, particularly commercial real estate.