For the most awaited US IPO since Facebook's, the ride-hailing company's first public outing sure left an impression on the market.
Uber’s IPO (initial public offering) has come and gone, but not before leaving the US stock market in a flurry – and not a good buzzing flurry either. Analysts, traders and the media are all busy patting their own backs in having predicted the IPO’s doomed fate, now that events have transpired.
What everyone had to say about Uber’s “car-wreck” IPO
Let’s start with the press, which had quite the handful of colorful titles to chuck at Uber.
In article titled Uber’s car-wreck IPO could change Wall Street’s thinking about its ‘unicorns,” the Los Angeles Times had this to say:
“Few things prove the ancient warning “Be careful what you wish for” like a Wall Street sure thing that blows itself to smithereens. For example, the Uber initial public offering.”
CNBC pitched in with its own serving of biting criticism in an article titled Uber’s IPO caps an era of mediocrity and small thinking in Silicon Valley
“While disappointing for investors, Uber’s debut may signal a welcome turning point for many in Silicon Valley,” CNBC said. “The Uber IPO caps an era characterized by big investments in relatively small ideas and an almost stubborn unwillingness to grapple with the larger challenges facing society and the world.”
As for The Wall Street Journal, it said: Uber Has Poisoned an IPO Market That Was Sick Anyway.
WSJ said: “Uber and Lyft have overtones of the wacky days of the dot-com bubble, when sketchy business plans and big losses were an active selling point.”
Analysts, on the other hand, were a bit more tempered in their criticism.
Fortune spoke to Tom White, analyst at D.A. Davidson, learning that: “The near-term trajectory and core platform projections are pretty bad. But we do acknowledge that some investors may be willing to own stock,” because in the long-term, Uber could eventually produce attractive margins.
Daniel Ives, an analyst at Wedbush Securities, told Fortune that “Uber’s trajectory is similar to the early days of companies like Facebook and Amazon.” Spoiler alert, things ended up well for both of these companies, so Ives foresees that “The best case is reaching profitability maybe in the next five to six years, but that’s going to be the biggest question mark for investors.”
Former NYSE President Tom Farley told CNBC:
“They waited too long to go public. Some of the issues they had — I’ll call it culture — some of the issues they had with their culture would’ve been solved in a public market... This is a company that has needed public discipline, this is a company that has needed a public currency, and it’s a company that should have gone public three or four years ago.”
Technology analyst Roger McNamee, co-founder of Elevation Partners, also spoke to CNBC, saying:
“Can we step back and just look at the really obvious? This deal is not going well, and it’s not going well for really important reasons… They’ve just raised $8 billion. They’ve dumped a ton of money with really, really bad fundamentals going on right now… I mean, we’re looking at a potential train wreck here.”
What happened exactly?
(Uber CEO Dara Khosrowshah during the opening bell of the trading session on the New York Stock Exchange (NYSE) during the company's IPO. Image: Reuters)
Now that we've gotten the nitty gritty of that which is stock market criticism out of the way, let’s recap what happened exactly.
Uber, the US ride-hailing firm that has proven a trailblazer as far as innovative tech companies go, had built up quite the hype up to its IPO. Butting heads throughout its run with US competitor Lyft, it decided to let its rival beat it to that coveted public status. Lyft, however, didn’t have quite a blast at this whole IPO business either.
Three days after its IPO, which took place on Friday March 29th, Fortune had this to say about Lyft:
“On Monday [April 1st], Lyft’s price per share dropped below $72, the price set for the company’s initial public offering on March 28. Lyft was valued at $24.3 billion during its IPO and $26.6 billion after its first day of trading on March 29.”
“The valuation tumbled to $19.8 billion by Monday. Lyft’s stock closed at around $69,” the site continued.
Ahead of its initial public offering on Friday May 10th, Uber looked poised to be using Lyft’s troubled IPO as a cautionary tale, setting a more realistic share price that put it at preliminary $82 billion market valuation. This was a far cry from the supposed $120 billion valuation it could reach. The share price set was $45, on the lower-end of the $44-50 range it had stated.
Still, conservative or not, Uber could not predict what would happen next.
“Shares of Uber stalled on their first day of trading on Friday, falling 7.6% to just under $42 amid mounting trade war tensions,” Fortune reported.
“According to noted IPO watcher Jay Ritter of the University of Florida, on a dollar basis, investors who purchased the 180 million shares offered through the IPO at $45 per share collectively logged $618 million in paper losses Friday,” the news site continued. “That represents the worst dollar losses for a U.S. IPO going back through 1975, excluding foreign stock listing in the country via American Depository Shares.”
To be fair, US President Donald Trump boosted tariffs on $200 billion worth of goods from 10% to 25% that same Friday, which had an adverse effect on the performance of Uber’s IPO.
Still, this has not saved Uber from the scathing comments of those involved in the matter, be it market analysts, investors, or the press.
Currently, Uber stock is sitting at $40.22, 10.7% below its IPO listing price.