A Disappointing First Day For UBER What Next
UBER had a tough first day of trading as a listed public company and its second looks like it could be another rough ride.
Share this:
UBER had a tough first day of trading as a listed public company and its second looks like it could be another rough ride. UBER’S initial public offering price was $45. Rather than popping higher, the firm trended lower across the session closing almost 8% below its IPO price. This put the value of UBER at $76.5 billion, barely above the $76 billion that private investors pegged to it in August last year.
Few large-scale IPO’s have stumbled so badly out of the gate. Facebook, Alibaba even Lyft, they all rose on their first day. To put it into context, since 2000, only 18 firms valued at over $1 billion and listed on US exchanges have opened below their IPO price.
Conditions were far from ideal for an IPO – the broader market was already in a bad place last week after Trump reignited US – Sino trade tensions with the threat of a trade tariff increase on $200 billion of Chinese imports. A threat which was put into action on Friday the day of UBER’s IPO and trade tariffs were hiked to 25% from 10%. Risk aversion dominated across the week and looks set to continue this week.
Lyft’s losses
Adding to the bad climate for a hail riding IPO, Lyft, UBER’s main rival reported eye watering losses of $1.1 billion in Q1. Both Lyft and UBER have been running at hefty losses for the past few years, which is a concern for investors. The road to profitability for Lyft and UBER is far from clear. In fact, investors are still weighing up whether these are functional businesses or just hail riding services funded by angels.
What does UBER’s IPO tell us?
Few large-scale IPO’s have stumbled so badly out of the gate. Facebook, Alibaba even Lyft, they all rose on their first day. To put it into context, since 2000, only 18 firms valued at over $1 billion and listed on US exchanges have opened below their IPO price.
Unfavourable broader market conditions
Conditions were far from ideal for an IPO – the broader market was already in a bad place last week after Trump reignited US – Sino trade tensions with the threat of a trade tariff increase on $200 billion of Chinese imports. A threat which was put into action on Friday the day of UBER’s IPO and trade tariffs were hiked to 25% from 10%. Risk aversion dominated across the week and looks set to continue this week.
Lyft’s losses
Adding to the bad climate for a hail riding IPO, Lyft, UBER’s main rival reported eye watering losses of $1.1 billion in Q1. Both Lyft and UBER have been running at hefty losses for the past few years, which is a concern for investors. The road to profitability for Lyft and UBER is far from clear. In fact, investors are still weighing up whether these are functional businesses or just hail riding services funded by angels.
What does UBER’s IPO tell us?
These are still very early days for UBER as a publicly listed company. We tend to see high levels of volatility in a stock around its IPO. What investors reaction to the IPO does tell us is that fast growing but unprofitable firms may not be looking as attractive to investors as they have in the past. This could be valuable knowledge as we look ahead to more tech companies moving towards going public. We expect there to be more caution in the IPO market going forward. Investors are not prepared to swallow the growth at all costs mantra of Silicon Valley.
UBER LYFT
Related tags:
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
SK Hynix IPO: Everything You Need to Know About SK Hynix
Learn everything you need to know about the SK Hynix IPO, including its Nasdaq listing, valuation, financials, ownership, competitors and investment risks.
Nasdaq 100 Outlook: Broadcom Extends Slide, Palantir Reversal Signal
Nasdaq 100 slides as AI funding fears bite, with Broadcom extending losses and Palantir flashing a potential reversal at resistance.
ASX 200 Market Wrap: Big Four Bounce, FMG Surges, CSL Lags
ASX 200 posts its best day in three months as big four banks rebound, FMG breaks higher and CSL continues to lag the market.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.