The run-up to Uber’s IPO and the subsequent debut of the ride-hailing app company’s shares on the New York Stock Exchange often saw reference to the post-IPO fortunes of smaller rival Lyft a couple of months earlier. Lyft’s share price saw a 9% gain on its IPO valuation over its first day of trading. However, the positive sentiment proved short lived and its shares have been on a downward spiral since – losing well over 30% of their value since that late March markets debut.
Things have started even worse for Uber, IPO investors not even having the window of one day to make a profit on their original buy-in price. On Friday, the market debut, Uber’s share price dropped 8%. According to data provider Dealogic, that slump represented the eighth heaviest for any U.S. company valued at over $1 billion making its post-IPO debut.
And Uber’s share price direction has moved from bad to worse for early investors, both those who took part in the IPO and others who weren’t able to make their move before markets opened on Friday. The stock dropped 10% when market’s opened on Wall Street today. There was a subsequently a slight easing of those losses but at the time of writing the share price was still almost 9% down.
The early losses this morning led to the NYSE putting a halt to traders taking further short positions on Uber’s stock. A ‘circuit breaker’ mechanism exists which stops short traders putting addition pressure on a stock after it has already suffered losses of more than 10% over one trading session. That short blocker will remain in place for the rest of today’s session as well as tomorrow.
Uber’s woes have been compounded by wider market falls coming as trade war tensions between the U.S. and China reignite. Beijing has today retaliated to new U.S. tariffs placed on Chinese goods last week with a new $60 billion tranche of reciprocal tariffs on U.S. imports into China. That has coincided with growing investor scepticism of the ride-hailing sector, with Lyft and Uber both still loss-making enterprises.
The declines in Uber’s share price come despite the fact the company took the decision to price its IPO at the lower end of its $44-$50 price range. Just a couple of months ago there were rumours the IPO would price Uber at over $100 billion. In the end the valuation came in at a more modest $82 billion. However, markets have clearly decided, at least for now, that was not modest enough, with Uber’s market capitalisation having now dropped below $70 billion.
Analysts Wedbush Securities, who are bullish on the long term prospects for Uber’s share price, commented for the Financial Times:
“The valuation digestion process of Uber (as well as Lyft) is going to take some time as the total addressable market of the ride-sharing market, ability to successfully execute on the strategic vision around Uber Eats/Freight, and getting Street credit for its autonomous success is a prove me situation and thus not going to be an overnight success story”.