Uber thought its IPO would be welcomed by the bulls on the Wall Street as there was a lot of hype surrounding the ride-hailing company before the D-day. However, IPO surprised everyone and ended its first day with investors scratching their heads as shares of the company fell as much as 8.8% from its offer price of $45 a piece on the NYSE. The stock ended the day at $41.57 down 7.6%, joining a small list of major IPOs that ended their first day in the red. As per DealLogic, Uber's weak debut makes it the ninth worst first-day performer of all time with a valuation of $69.71 billion.
Since 2000, only 18 companies that are valued at over $1 billion opened below their IPO price on the American exchanges. On average, tech stocks have jumped - or "popped," in Wall Street parlance - 41% on their first day of trading over the past 24 years, said Dealogic.
Uber Technologies' IPO was the biggest US IPO in the last five years and the company had raised $8.1 billion dollars. The weak debut raised fresh doubts over the ability of Uber to generate revenue. It also highlighted the scale of its losses. Earlier, Uber had disclosed a net loss attributable to the company for the Q1, 2019, of around $1 billion on sales of roughly $3 billion.
However, the initial days generally do not determine the fate of the company. One look at tech companies like Facebook will tell you that this is a marathon race. Facebook is currently 392% up since its debut despite several allegations and slowdown in its user growth. Initial reports suggest that the Uber's bankers, Morgan Stanley and Goldman Sachs, had misjudged the demand. The recent decline in the earnings also raised doubts on the ability of Uber to make money. The doubts were also strengthened by the way Lyft, Uber's competitor in the US, fared post listing. Lyft witnessed a bumper opening on its first day but wasn't able to sustain the momentum. The company also posted a bigger than expected first-quarter loss.
Uber debut was also affected by stock market volatility caused by US and China trade standoff. Uber CEO Dara Khosrowshahi told the Wall Street Journal that the ride-hailing giant had expected the market to be choppy. "We knew we'd have a volatile day ahead of us."
Uber was founded by Garrett Camp and Travis Kalanick in 2009. The app, initially called UberCab, was a result of Garrett Camp's hopelessness at the lack of transportation options in LA, USA. In 2017, Kalanick was ousted after charges of harassment and unlawful behaviour were made against him. Currently, former CEO of Expedia Group, Dara Khosrowshahi, is the chief executive officer of Uber.
Edited By: Udit Verma