Ride-hailing giant Uber Technologies, Inc. begins trading as a public company, under pressure to start trading strongly after conservatively pricing its initial public offering (IPO).
The company was urged also to prevent its string of scandals to threaten its name, including the culture of sexism and bullying at the company, which culminated in the resignation of co-founder and CEO Travis Kalanick in 2017.
At the IPO, the initial trading was priced at $45 per share, at the lower end of its $44-$50 per share target range, to raise $8.1 billion at a $82.4 billion valuation.
With big aim, the IPO was oversubscribed. However, Uber settled for a lower price to avoid a repeat of Lyft Inc’s IPO in late March, which priced strongly, began trading up, then fell. Uber also wanted to accommodate big mutual funds, which unlike hedge funds put in orders for a lower price.
Uber began trading at the New York Stock Exchange (NYSE) under the symbol “UBER,” and quickly became the most anticipated U.S. debut since Facebook's IPO, seven years ago in 2012.
Uber is the biggest company to emerge from an age of smartphone apps. But things didn't look good for the company.
After experiencing a rough road to the public market, as the day of trading began, its trade volume quickly plummeted, pushing price down significantly.
In terms of percentage losses, Uber’s dip doesn’t even scratch the surface of the worst IPOs. But the staggering valuation of the company makes it, in raw scale, “among the top 10 IPOs ever” including companies outside the U.S., according to University of Florida professor Jay Ritter.
That single digit decline resulted in an estimated $617 million paper losses.
More reasons of the bad performing stock, was because the IPO was set against a backdrop of a spike in tensions between the United States and China, which renewed fears of a global economic slowdown and hampered global markets.
Uber's debut was also met with an already volatile market, where the S&P 500 index was experiencing its fifth consecutive daily decline and its worst weekly performance of the year.
Since founded, Uber has changed urban transportation, disrupted the taxi industries, defied regulators around the world, and allured others similar to follow.
As a private company, Uber has raised more than $15 billion from investors to fuel its growth and expansion into food delivery and freight hauling, with little regard for turning a profit.
As a matter of fact, the popular and the highly anticipated ride-hailing pioneer lost $1.8 billion in 2018, the first full year under new CEO Dara Khosrowshahi, according to the company's select financial results for 2018.
According to analyst, Uber can either be profitable or go bankrupt. But it's real plan is not to get as much money as possible, as much of its effort goes to developing and testing technologies that would eventually replace its human drivers.
As former CEO Travis Kalanick said in 2014, “the reason that Uber could be expensive is you’re not just paying for the car, you’re paying for the other dude in the car who’s driving.”
With the poor performing IPO, investors are realizing that what they’re paying high for, is for an unsustainable company.
One of which, was PayPal that privately invested into Uber concurrent with the ride-hailing company's record breaking IPO. Four hours after first trade, Uber was worth $41.64 per share, giving PayPal's $500 million a value of $462.7 million.
What this means, PayPal lost $37 million in value in a matter of hours.
