Uber shares slide into negative territory in initial moments of trading

Daniel Fowler
May 11, 2019

The ride-hailing company sold 180 million shares for $45 each, according to a statement Thursday.

After much hype leading up to the largest initial public offering in five years, Uber hit a few potholes on its first day of trading, closing down 8% and reflecting lingering doubts about its future prospects for profitability. He said that if you saw value in Uber at its IPO price of $45 U.S., nothing has changed in the last 48 hours.

The ride-hailing company injected investors with a dose of reality right out of the gate, trading at $42 a share Friday - or almost 7% below its IPO price of $45 on an already volatile day for the markets.

Matt Kennedy, a senior IPO market strategist at Renaissance Capital, says that over the past five years, just 10 per cent of US technology companies backed by venture capital finished their first day of trading below their IPO price.

That sobering reality is one reason that Uber fell short of reaching the $120 billion market value that many observers believed its IPO might attain. The float is likely to be the biggest public listing in the USA this year and one of the biggest of all time.

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In distributing the stock, Uber prioritized shareholders - particularly institutional investors - that it thinks will hold on to the shares for a long time, according to a person familiar with the matter. After submitting its confidential filing in December, Uber - along with Lyft Inc. and a host of other hopefuls - was left sitting on the sidelines while US stocks enjoyed the best start to a year in at least a decade. 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.

Despite Lyft's bad luck, investors who have subscribed to Uber's IPO still expect it to perform well.

"Uber is basically Lyft 2.0".

Uber lost US$3.03 billion in 2018 from operations, and reported a net loss attributable to the company for the first quarter of 2019 of around US$1 billion on revenues of roughly US$3 billion. Morgan Stanley, Goldman Sachs Group Inc. and Bank of America Corp. led the listing.

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