Uber Slides In Second Day Of Trading After IPO Disappointment

Matthew Broersma,
uber

Unprofitable ride-hailing firm had set price at low end of range, but is still punished by sceptical investors and wider market turbulence

Uber slid in early New York trading on Monday in its second day of declines after a disappointing IPO on Friday.

By mid-morning EDT the shares were down more than 7 percent and were trading at below $40 (£31), compared with a flotation price of $45 per share.

Uber had chosen a price at the low end of its expected range of $44 to $50 in an effort to escape negative investor sentiment that has also affected rival Lyft, which went public in late March.

Uber’s shares fell nearly 8 percent following their market debut on Friday, in the eighth-worst first day share price performance for a US-listed IPO worth more than $1bn, according to Dealogic.

‘Unicorns’

Uber’s IPO was the most anticipated debut since that of Facebook, with the company considered as in some ways representative of a group of so-called “unicorns”, high-flying start-ups that have raised more than $1bn in rounds of private financing.

Market watchers said that the public markets are much less forgiving than private investors of firms such as Uber and Lyft that have high costs and have never turned a profit.

Early-stage investors made large gains from Uber’s market debut, but others are now in the red.

The IPO price of $45 was below the price at which shares were sold to private investors three years ago, and its market value is below $70bn, significantly less than the $100bn it had targeted until recently.

Market unease

Lyft, too, slid more than 5 percent in early trading on Monday, leaving shares at around $48, compared with an IPO price of $72.

Some analysts argued Uber’s long-term prospects are strong, observing that the IPO came at a time of market turbulence notably caused by concerns over trade tensions between the US and China.

The company has played up its expansion plans, saying it could potentially provide services in a wide range of areas, including logistical support for deliveries of food, groceries and freight, and even areas such as electronic payments and financial services.

“If we build and build well, shareholders will be rewarded,” chief executive Dara Khosrowshahi told Reuters. “We’re certainly not measuring our success over a day, it really is over the years.”