On May 10th 2019, Uber Technologies Inc. launched its IPO, with trading beginning on the New York Stock Exchange. It was the most anticipated IPOs of the last seven years, and the biggest IPO of this year. However, things turned sour quickly and Uber has already earned the unwanted title of being among the worst performing IPOs ever!
The Uber IPO already had an underwhelming launch being valued at $ 45 per share, which was at the lower end of the targeted range. On 10th May, which was the first day of trading, the stock fell an astonishing 7.6% to close under $ 42 per share. This represents a collective loss of around $ 618 million on paper for the investors who had bought the 180 million shares offered in the IPO, according to distinguished IPO watcher Jay Ritter. This performance is being seen as the worst in over 40 years, with a similar performance from a U.S. IPO being tracked all the way back to 1975. In terms of the drop n share price, Uber’s IPO stands at ninth in the list of the worst first day performers, according to DealLogic.
One of the reasons behind this performance seems to be the escalating trade war between USA and China, which has left the financial markets in a little bit of disarray. Recently President Donald Trump chose to escalate the war further increasing tariffs from 10% to 25% on goods worth $ 200 Billion. Another factor behind this performance of Uber IPO being discussed is the performance of its rival Lyft. Lyft’s IPO opened to a lukewarm response and ended up suffering losses, with the last report being of 35% losses since April. This seems to have played on the minds of investors when it came to Uber’s IPO. The IPO’s performance puts more pressure on the investors like Saudi Arabia’s Sovereign Wealth Fund, which had bought into the IPO at a time when the share price was above $ 45.
However, first day of the IPO should not be the final nail in a company’s coffin. There have been many companies who have opened at losses on the first day of the IPO but then gone on to perform very well at the stock exchange, for example Facebook who had a disastrous IPO first day. Investors can hope for a similar performance from UBER going forward and put the first day flop behind it very soon.