Investors underwhelmed by Uber IPO
Uber CEO Dara Khosrowshahi (C) arrives at the New York Stock Exchange on Friday, May 10, for the company's IPO. EFE-EPA/Justin Lane
Traders at work on the floor of the New York Stock Exchange on Friday, May 10. EFE-EPA/Justin Lane
Uber founder Travis Kalanick (C) poses for photographers on Friday, May 10, ahead of the company's debut on the New York Stock Exchange. EFE-EPA/Justin Lane
New York, May 10 (efe-epa).- Uber's debut Friday on the New York Stock Exchange, the largest IPO listed in the United States since 2014, was less than a rousing success, as shares of the ride-hailing giant fell 7.56 percent to end the day at $41.60 a share.
Market watchers attributed the disappointing performance to concerns raised by the steep drop in the price of Uber's main rival, Lyft Inc., following its IPO in late March, and uncertainty about prospects for a US-China trade deal.
Uber opened Friday at $42 per share, below the IPO price of $45 a share, and never rose higher than $44 during the session.
While the offer price implied a market capitalization of around $82 billion, Friday's closing price reduced the market cap to roughly $69.72 billion.
Uber had initially hoped to achieve a stock market valuation of $120 billion, though management subsequently reduced that target to $100 billion.
The coincidence of the IPO with an increase in trade tensions between Washington and Beijing was certainly bad luck for Uber.
Stocks on the NYSE struggled in early trading Friday, with a roughly 359-point drop in the Dow Jones Industrial Average in response to a tweet by US President Donald Trump indicating that he was in no hurry to reach a deal to settle Washington's trade war with China.
But the Dow made up those losses to finish the session with a gain of 114.01 points, or 0.4 percent, after Trump and US Treasury Secretary Steve Mnuchin said that negotiations with China were going well.
Uber, however, did not benefit from the late surge of positive sentiment, which would indicate that the lack of enthusiasm for its shares had more to do with what happened to Lyft.
The first of the "unicorns" - privately held firms worth more than $1 billion - to go public, Lyft saw its stock price rise more than 20 percent at the start of its first day of trading on the Nasdaq.
That initial surge on March 29 raised Lyft's stock market valuation to $24.7 billion.
But the share price has tumbled 29 percent since then.
Uber had revenues of $11.27 billion in 2018, with net income of $911 million. Even so, the company's earnings before income, taxes, depreciation and amortization (EBITDA) were $1.85 billion in the red.
The firm has yet to turn a profit.
Uber CEO Dara Khosrowshahi, who was at the NYSE for the IPO, said in an interview with CNBC's Andrew Ross Sorkin that his company has the potential to reach the size of e-commerce titan Amazon.
While he conceded the enormous gap between Amazon and Uber at present, he would not abandon the analogy.
"It's a fair comparison at the wrong time," Khosrowshahi said. "So a lot of private companies now are holding off much longer before they go public. We are much bigger, much more mature as a company as we go public, and if you do look at the growth rates, our audience is growing 33 percent on a year-on-year basis, transactions are growing 36 percent."
"To be able to grow transactions 36 percent on a $50 billion base is pretty incredible, and we hope to keep it going," the CEO said.
Uber's chief financial officer, Nelson Chai, spoke of "a tough day" shortly after the stock made its debut.
"We weren't optimizing to have the best opening price or the opening day. We're really looking for how the stock continues to trade over time and that's what we're building for," he told CNBC.
Uber's greatest strength in comparison with Lyft and other ride-hailing firms is diversity, with a food delivery service (Uber Eats) and a transportation-logistics arm (Uber Freight). EFE