Uber IPO Sputters, Stock Already Trading Below Initial Price

Uber IPO

Even at the tamped-down price, Uber now has a market value of $82.4 billion - significantly more than century-old automakers General Motors and Ford Motor.

Like numerous IPO class of 2019, Uber is deeply unprofitable.

The IPO was oversubscribed, but Uber settled for a lower price to avoid a repeat of Lyft's IPO in late March, which priced strongly then plunged in trade. The IPO came in at the lower end of Uber's targeted price range of $44 to $50 per share.

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.

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The IPO raised another $8.1 billion for Uber as it tries to fend off rival Lyft in the USA and help cover the cost of giving rides to passengers at unprofitable prices. Lyft was down 4 percent, well below its IPO price.

"It reflects maybe a little bit more investor caution", D.A. Davidson & Co analyst Tom White said of the Uber IPO.

A market value of less than $75 billion is a considerable climb down from earlier projections: a year ago, bankers jockeying to lead the offering told Uber it could be valued at as much as $120 billion in an IPO.

The IPO pricing is a balancing act for Uber's team of underwriting banks, led by Morgan Stanley, Goldman Sachs and Bank of America Merrill Lynch, to negotiate a good price while leaving some upside to ensure the stock trades up on its market debut.

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Uber might be even more popular if not for a series of revelations about unsavory behavior that sullied its image and resulted in the ouster of its co-founder, Travis Kalanick, as CEO almost two years ago. On Thursday, Axcella Health began trading well below its $20 IPO price and ended its first day at $13.80.

Despite the volatile market, Khosrowshahi said he did not consider postponing Uber's IPO date. CEO Dara Khosrowshahi tried to strike a positive note, telling Reuters from the trading floor of the New York Stock Exchange, "My reaction [to the share price] is if we build and build well, shareholders will be rewarded". Its revenue previous year surged 42% to $11.3 billion while its cars completed 5.2 billion trips around the world either giving rides to 91 million passengers or delivering food. Uber reported a loss of $3.03bn in 2018 from operations. "The trouble is that's going to require keeping investors at bay who are putting pressure on Uber to deliver earnings".

Arun Sundararajan, a professor at New York University's business school, said that while going public will give Uber money to capture more of the transportation market, it could also push it to put quarterly targets ahead of its broader ambitions.

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