Uber's stock tumbles further
Ryan Graves (C), one of the co-founders of Uber, celebrates the initial public offering for Uber at the New York Stock Exchange in New York, New York, USA, 10 May 2019. EPA/FILE/JUSTIN LANE
By Maureen Farrell, Corrie Driebusch and Justin Baer
New York (USA), May 14 (efe-epa).- Uber Technologies Inc.'s stock dropped sharply Monday, marking another setback for the highest-profile company to go public in years and threatening to cast a chill over what had been a red-hot IPO market, according to a Dow Jones Newswires report made available to EFE on Tuesday.
Uber's stock slid $4.47, or 11 percent, to $37.10 on its second day as a public company, placing it 18 percent below the ride-hailing giant's initial-public-offering price of $45. That is after Uber's valuation expectations were dialed back in recent weeks and the company priced its IPO conservatively, in its view.
The slide in Uber shares marks the second big blemish this year for the IPO market, as rival Lyft Inc. went public in late March in another hotly anticipated offering and quickly tanked. It shares are now 33 percent below the initial price of $72 a share.
In an email to Uber's employees seen by The Wall Street Journal, Chief Executive Dara Khosrowshahi wrote: "Obviously our stock did not trade as well as we had hoped post-IPO...I expect some tough public market times over the coming months."
This year is expected to be a banner one for IPOs, with several notable companies hitting the public markets. Uber, Lyft, Zoom Video Communications Inc. and Pinterest Inc. have already gone public, and Slack Technologies Inc. and WeWork Cos. are expected to land later this year.
Shares of those IPOs slid on Monday. Lyft declined 5.8 percent, Zoom slid 8.9 percent and Pinterest fell 8.3 percent. Still, Pinterest is up 40 percent from its IPO price and Zoom is trading at roughly double its offering price.
Beyond investors who bought in at Uber's IPO price and have been burned, many private investors who have pumped money into Uber over the past several years are now underwater.
Uber is trading about 28 percent below its Series G stock price of $48.77, in which the company raised more than $8 billion from December 2015 through October 2018.
Catherine McCarthy, a technology analyst at Allianz Global Investors, said Allianz had owned Uber shares before the IPO but was no longer invested.
"Our confidence was really shaken by Lyft," McCarthy said. "To see Lyft continue to fall hasn't helped."
McCarthy said she is also concerned that Wall Street isn't expecting Uber to report net income for at least several years, and that is if the company executes on its strategy. "That's a long time," she said.
Broader markets have been rocky as investors grapple with a spat over trade between the United States and China. When Uber went public Friday, markets were selling off sharply, although the company's shares took a dive into the close while markets rallied.
On Monday, stocks were much lower, with the S&P 500 falling 2.4 percent. On both days, tech companies bore the brunt of investors' punishment.
The drop in Uber's valuation weighed on shares of its biggest backer, Dow Jones added in a report made available to EFE.
SoftBank Group Corp.'s US-traded stock fell an additional 5.5 percent on Monday after ending Friday 12 percent lower. SoftBank bought into Uber in early 2018, writing a $7.7 billion check for a roughly 15 percent stake.
The tepid investor response reflects muted expectations that Uber will be "an overnight success story," Wedbush Securities analysts said in a note.
They said investors will need time to digest how Uber fares with competitors, its strategic vision around Uber Eats and Freight, and its autonomous ambitions.
"We expect Uber to be operating at a loss for at least the next few years, but believe investors should be more patient with Uber's investments as its leadership position will help lead to better long-term competitive positioning for this tech juggernaut," the analysts said.
A lack of profitability is one hurdle in a series that threaten Uber's bid to become the destination for all forms of transportation. An onslaught of competition from ride-hailing rivals and food-delivery startups helped inflate Uber's loss to more than $3.7 billion in the 12 months ended in March. That is by far the largest loss by a US startup in the year before an IPO, according to S&P Global Market Intelligence.
Uber's revenue growth has also flatlined, a problem for a company that pitched itself as one defined by growth. While revenue was on a rapid march upward in 2017, growing well over 10 percent every three months, it has barely budged in the past few quarters. Its revenue between last year's third and fourth quarters grew by just 1 percent and an additional 3 percent in this year's first three months, to about $3.1 billion.
Uber has attributed its stalling growth to aggressive competition around the globe, with cash-infused rivals such as Didi Chuxing Technology Co. pushing deals to woo riders and drivers in Latin America, for example.
Uber has had to fight back with costly discounts to riders and subsidies to drivers, and it has lost market share in some major markets.
Its Uber Eats food-delivery business, touted by executives as a shining star, has lost some ground in the US, India and elsewhere.
During the roadshow to pitch the IPO to potential investors, Mr. Khosrowshahi often compared Uber's business model to that of Amazon.com Inc. In his letter to employees Monday, he noted that both Amazon and Facebook Inc.'s stocks struggled in their early days as public companies. "And look at how they have delivered since. Our road will be the same."