Uber IPO Sputters, Stock Already Trading Below Initial Price


Nevertheless, the offering values Uber at $82.4 billion - impressive, no doubt, but less than the $100 billion forecast Uber floated to investors this year and far below the $120 billion that some bankers anticipated last year.

Uber's IPO came against a backdrop of turbulent financial markets, fueled by the trade dispute between the United States and China, as well as the plunging share price of its US rival Lyft Inc.

Picking the right number helps ensure that the stock has a stable start to trading: The price goes up, but not enough to worry investors into thinking that more money should have been raised. Lyft's shares closed Thursday 23% below its IPO price of $72 in April.

"If a venture capital investor wants to burn cash they can do that as long as they want, but once you get to the public markets you have to show profitability or a path to it", said Jordan Stuart, a portfolio manager at Federated Kaufmann who often purchases companies' shares during an IPO.

A market value of less than $75 billion is a considerable climb down from earlier projections: a year ago, bankers jockeying to lead the offering told Uber it could be valued at as much as $120 billion in an IPO.

-China trade worries. Moreover, smaller rival Lyft Inc's shares plunged this week after its first earnings as a public company.

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The jitters about an intensifying US trade war with China also have roiled the stock market this week.

Uber has said that it has the potential to grow not just in the cab hailing business, but also as a "superapp" to provide a variety of logistic services, such as grocery and food delivery, organizing freight transportation, and even financial services, much like Grab, its Southeast Asian counterpart.

Japan's SoftBank Group Corp 9984.T , for example, invested in Uber in early 2018 at $48.77 per share. CEO Dara Khosrowshahi tried to strike a positive note, telling Reuters from the trading floor of the New York Stock Exchange, "My reaction [to the share price] is if we build and build well, shareholders will be rewarded".

Uber may be able to avoid Lyft's post-IPO stock decline because it has a different story to tell other than the potential for growth in ride-hailing, says Alejandro Ortiz, principal analyst with SharesPost.

Uber might be even more popular if not for a series of revelations about unsavourybehaviour that sullied its image and resulted in the ouster of Travis Kalanick as CEO almost two years ago. Robert Johnson, professor of finance at Heider College of Business, Creighton University in Omaha, Nebraska said. And when it is the only game in town, it's going to ratchet up its prices and wring every bit of money out of the drivers who make up its workforce.

Despite the volatile market, Khosrowshahi said he did not consider postponing Uber's IPO date.