Ride-hailing company Uber Technologies, Inc. had their initial public offering on Friday. The IPO price opened at $45 per share and closed after its first session at $41.57, or $3.43 (7.6%) of its opening price.
The company raised around $8.1 billion on its first day, resulting the investors in a collective loss of about $618 million. This resulted in one of the most anticipated tech IPO’s of recent times becoming a disapointment. According to DealLogic, this marks Uber as the 9th worst first day performer of all time.
Reasons of Uber's weak IPO
There are many factors that lead to the dissapointing performance of Uber’s public offering. Increasing tension in the US-China trade lead to increased skepticism of Uber Technologies ability to become profitable. It didn’t help that Uber estimated a net loss of around $1 billion for the first quarter of 2019.
The expected net loss attributable to Uber Technologies, Inc. is due to increased loss from operations for the three months ended March 31, 2019 due to continued investment in our core platform, including increased investment and promotional spend.Uber Technologies, Inc.
Last fall, Uber was expected to make their debut at a $120 billion valuation. However, they started off their public trading at $82.4 billion, well below expectations. The company also faced many regulatory hurdles and issues in driver wages in several countries.
How this could affect Uber
Uber might see itself losing its talent pool if the stock doesn’t start performing better soon. Employees expecting better returns after the IPO might get disappointing, turning towards better offers. This is because many passion driven workers prefer stock options rather than compensation, especially in Silicon Valley tech startups.
Many early investors could lose faith in the company, especially private investors that bought shares at prices higher than $45.
Uber's IPO is a disappointment, not a failure
This monumental moment for the decade-old company ended in a dissapointment, but not a disaster. The first day of IPO doesn’t determine the company’s long term fate. Though it is especially upsetting for initial investors, if the company manages to attain profitability soon, it could be quite a turn for investors.
The company will still have many hurdles including, but not limited to, regulatory issues, sexism, bullying, inappropriate driver behavior, and driver wages.
However well the company may perform later, their first day of IPO will still be marked as a disappointment – a day it will not forget.
Cover Image Source: CNN