It was supposed to be the biggest IPO of the year, and because the company in question was Uber, the ubiquitous ride-hailing app that has a footprint all over the world, it was believed that it would not disappoint. However, the IPO has left many investors in a sour mood. Since last year, the Uber IPO was the biggest most anticipated one since Facebook’s listing back in 2012, and many analysts believed that the company could command a valuation of $120 billion. Eventually, the company decided to price its shares far more conservatively within a price band of $44 to $50 and sought a valuation of $90 billion. However, the company’s debut day was not as great as was anticipated, and although Uber’s valuation rose to $82.4 billion at one point, the shares eventually sank below its IPO price of $45.
Rival Lyft performed poorly in the stock market since its listing in March, and that was possibly one of the reasons why Uber priced its share far more cautiously. Despite quoting a range of $44 to $50, the company priced its shares at $45 in its IPO, and that was towards the lower end of the range. Despite that, the company could not escape listing day blues as the shares to $41.54, reflecting a significant drop of 7.6%. It is particularly worrying since the broader market ended up in the green. Additionally, it is quite rare for any company to end up with losses on the first day of trading and according to date, only 20% of companies have been in the red on the first day of trading.
However, Uber’s poor performance on a listing day could hamper the performance of other mega startups which are set to have their IPO this year and the one that is being talked about with great gusto at the moment is WeWork’s IPO, which could see the company valued at $47 billion. Moreover, Uber’s massive losses and the company’s admission in its IPO prospectus that it might never actually make a profit have probably been noted by the market as well. Investors in the public market have very little tolerance for a company that makes huge losses, and it remains to be seen how it affects other tech IPOs this year. One portfolio manager said, “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.”