Markets

Uber’s Bust(ed IPO) Of A First Day

IPO

Call it a less than auspicious beginning.

When the rubber met the road, when the trading actually became reality, Uber sputtered. To say the least.

The fact is, a busted IPO is a busted IPO, and while one day of trading does not a trend make, it cannot be argued that Uber’s initial public offering was a triumph.

The stock closed down 7.6 percent on the day — and curiously, the general markets, at least as measured by the Standard and Poor’s 500 Stock Index, were up (by roughly 35 basis points).

The broader sentiment of Friday (May 10) shows a whimper of a rebound after a decidedly negative stretch of trading over several sessions that saw investors flee equities in the wake of a renewed trade war.

But clearly a rising tide that lifted (most) boats did not lift Uber, and this means that Uber-specific issues were at work in sending the stock down. As noted in this space, Uber has been striving mightily to move beyond its core ride-hailing business, and use a platform approach that spans verticals, taking perhaps a page from the Amazon playbook.

And while the red ink that has dominated the bottom line may eventually turn to black, the snapshot of Friday’s one-off, one-day trading is no real vote of confidence.

The Wall Street Journal noted Friday that some of the earliest seed investors have made some startling returns, in the thousands of percentage points (such as First Round Capital, which had a seed investment of $510,000 that is now valued at $2.5 billion). Other investors, individuals who ponied up, say, $5,000 or more … now have stakes worth in the hundreds of millions of dollars.

And yet others have not fared as well. As Fortune reported, some other investors such as Saudi Arabia’s wealth fund bought shares for roughly $48, which was above the IPO pricing of $45, and far above the $41 and change that marked Friday’s close.

The roughly $82 billion valuation that marked the company’s entrance into the public markets is not exactly chump change, but as the stark contrast in fortunes noted above show, timing is everything.

The voting and the weighing of Uber’s prospects is now open to the public, in a manner of speaking. The branching out into food delivery and logistics remains a nascent push, versus the core ride-hailing business, and there, the company has said, it aims to reduce driver incentives (as stated in its S-1 filing).

While Uber’s 7 percent slide on Friday is nothing like the 30 percent plus post-IPO downturn that marked Lyft’s own push into the end of this week, we’ll call the downturns a difference of degree and not of kind.

Get ready for day two of a long journey.

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

TRENDING RIGHT NOW

To Top