Uber’s Ugly IPO
Last month I posed a question on the true market value of Uber. As the company was prepping for its IPO rumors circulated about a $90-100B market cap, which would peg its valuation higher than GM and Ford combined. Last week Uber pressed the go public button at what they thought was a conservative value (a paltry $82B), but then found out the hard way that even that number was priced too high for the Street. By the end of the first day of trading Uber’s share price dropped 8%. The cumulative loss on the company’s value was $655M, which was the worst IPO performance from a pure dollar value in the history of the NYSE. When the dust finally settled the stock closed on Friday at $69B – still a huge market cap but way below the original estimates.
So what went so wrong with Uber’s IPO? Part of the problem was being late in an over-soaked IPO market. Since the beginning of the year the tech sector has seen Pinterest, Slack and Lyft go public – this probably pulled investor money off the table, leaving less demand for Uber. The other problem was the post-IPO performance of Uber’s closest competitor Lyft. Since going public in late March Lyft’s stock price has dropped 35% – not exactly the confidence builder investors want to see in the rideshare space.
All isn’t lost for Uber though. The stock price should eventually rebound (remember Facebook was down big in the months after its IPO), and they now have over $8B in capital to reinvest in their business. Hopefully that will take the pain out of the sting early investors are feeling right now.