Uber IPO is called the ‘worst ever’ after investors lose $618million

Uber IPO is called the ‘worst ever’ after investors who bought at the offering price lost $618million on paper

  • Uber’s shares sank 7.6% after its IPO on Friday, wiping $6.3B from valuation
  • Other companies have plunged more in percentage terms but not valuation
  • Expert estimates investors logged $618 million in paper losses Friday 
  • That is the worst first-day dollar loss for a U.S. company at least through 1975 

Uber’s IPO is being called the worst ever by at least one measure, after the company’s investors suffered higher dollar losses in the first day than in any other float in the U.S.

Uber’s stock plunged 7.6 per cent on the first day of trading on Friday, wiping about $6.3billion from the company’s initial valuation of $82billion at the $45-per-share offering price.

Other large companies have plunged more in percentage terms on the first day of trading – for instance ZTO Express, whose share price dropped 15 per cent on the first day of trading when in launched with a $14.3billion valuation in 2016.

But the sheer scale of Uber’s valuation means that that the raw dollar losses are the biggest ever, at least on paper.

Uber CEO Dara Khosrowshahi (second from right) and co-founder Ryan Graves (right) ring a bell on the trading floor of the New York Stock Exchange to mark the first trade

The investors that bought in at Uber’s $45 offering price logged a total of $618million in paper losses Friday, noted IPO watcher Jay Ritter of the University of Florida told Fortune.

He said is the the worst dollar loss for a U.S. IPO going back through 1975, excluding foreign stock listing in the country via American Depository Shares. 

Many initial investors will likely hang on to their shares and may still turn a profit if the share price rises, it should be noted.

In terms of the share price drop, Uber’s IPO ranks as the ninth worst first day performer of all time, according to DealLogic. 

Only about a fifth of IPOs have ended their first day of trading in the red in the last two years, according to Dealogic data. 

Uber’s road to IPO was marred by several hurdles including increased regulation in several countries and fights with its drivers over wages.

Uber’s shares dropped 7.62% on Friday, the ninth worst first day plunge in history. But total dollar losses were likely the biggest ever due to the company’s high valuation

Uber has also weathered controversies including revelations of a culture of sexism and bullying at Uber and U.S. Department of Justice investigations. 

After a series of embarrassments, Kalanick was forced to resign in 2017 by a group of investors. Uber then hired Khosrowshahi to lead the company.

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

But market experts have struggled to find value in a company that has consistently posted losses, and warned that it may never be profitable. 

‘The business is unprofitable, new entrants can enter the market, there is potential regulatory risk, and it is very price sensitive,’ said Robert Johnson, professor of finance at Heider College of Business, Creighton University in Omaha, Nebraska said.

He added: ‘What is there to like about this opportunity?’ 

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