Uber IPO joins rank of Wall St flops
NEW YORK: It was to usher in nothing less than a new era for Wall Street. UFAANG.
That ungainly acronym, envisioned by some at Morgan Stanley as the hype grew over Uber Technologies Inc, put the ridehailing company in the same league as the titans of tech: Facebook, Amazon, Apple, Netflix and Google.
But by Friday’s closing bell, the most talked-about startup of the decade and the biggest initial public offering (IPO) of the year suddenly qualified for a different club — of losers.
Done in by a broad stock market selloff and a weak earnings report posted by its primary rival, Uber plunged immediately at the opening of trading, falling as much as 8.8 per cent from its IPO price of US$45 (RM187.20) per share, a level that was already at the low end of bankers’ expectations. The stock closed at US$41.57, and Uber joined a small group of major IPOs that ended their first day down.
Day One doesn’t necessarily determine the fate of a stock, of course. But Uber’s rough opening startled investors counting on a more jubilant debut from Silicon Valley’s quintessential unicorn. Many venture capitalists who had piled into the company were saddled with losses as the market capitalisation shrank to US$69.7 billion.
It all cast a pall on 2019’s prospects as the hottest year for tech listings this decade — and potentially on the future of the ride-hailing industry.
Lyft Inc followed its bigger competitor to end Friday down 7.5 per cent, almost US$21 below where it sold the stock just six weeks ago.
A Morgan Stanley memorandum to a group of wealth managers touted Uber’s “massive, leading global platform” and other attributes and predicted the acronym for the best-performing tech stocks would gain a “U”, according to documents obtained by Bloomberg. (The documents used an old version, FANG, without the A for iPhone maker Apple.)
A spokesman for Morgan Stanley’s wealth arm declined to comment. The bank led the listing with Goldman Sachs Group Inc and Bank of America Corp.
Uber could certainly still join the celebrated group of popular tech stocks, even with a tough ride out of the gate.
Dara Khosrowshahi, Uber’s chief executive officer, said in an interview on the floor of the New York Stock Exchange trade tensions between the United States and China played a role in the weak performance. President Donald Trump had moved overnight to slap fresh tariffs on Chinese goods.
“You can’t pick when you go public,” said Khosrowshahi.
Still, Uber shares extended losses into the close, even as US equities stabilised on renewed optimism that an all-out trade war can be averted.
It took more than two hours for the stock to start trading after Uber executives and drivers congregated at the exchange for the bell-ringing ceremony. The shares debuted at US$42, well below the IPO price. A tense wait for those on the trading floor turned into a jittery start for the newly public company, which touched its intraday high and low prices within 35 minutes of opening.
Uber’s inauguration was no doubt closely watched by the cavalcade of IPO hopefuls lining up to list this year. That crop includes Peloton Interactive Inc, Postmates Inc, Slack Technologies Inc and WeWork Cos, all of which have preparations in progress to go public this year.
Along with Uber, they would be following companies including Lyft Inc, Pinterest Inc and Beyond Meat Inc to market.
Beyond Meat ended the week 165 per cent over its IPO price with a valuation of US$4 billion. Pinterest extended gains to close 53 per cent above its listing price of US$19 a share.
Len Sherman, a professor at Columbia Business School, said while too much attention was paid to trading on Day One, Uber provided enough financial information in the run-up to the IPO for investors to know what they were buying into.
“The market has reacted negatively to a shared reality that both Lyft and Uber are struggling with a fundamentally broken business model,” he said. “Uber has lost more money faster than any startup in history, with no clear path to profitability.”