Uber’s public flat – the most anticipated tech stock IPO in the US since the Facebook IPO, failed to perform according expectations on Friday.
According to data from Dealogic, Uber’s IPO performed fifth worst in 24 years according to at least one measure – the weakest one-day return by a company that had a value of at least $10 billion.
According to FactSet data, the valuation of Uber after the first day of trading was at $69.71 billion as it finished Friday trade off 7.6% at $41.57. a day befor the public float, the price of its share as placed by the company was at $45.
Over the last 24 years, only four other companies performed worse than Uber in terms of the first-day returns for companies that are valued at least $10 billion. Uber had raised about $1.5 billion on January of 2018 but booked a first-day slide of 11.5%. In comparison, there was a 13.6% drop in the share price in first day trading for the U.S. listed shares of Chinese company IQIYI Inc – which is also known as the Netflix Inc. of China.
Notable is that of the companies of Uber’s peers in terms of size, Facebook Inc.’s notoriously glitch-stricken IPO, resulted in a better one-day return, gaining 0.6% on May 17, 2012.
However the IPO launch of Uber ay the New York Stock Exchange came at a time when the Trump administration of the United States heightened its trade war with China with an increase of tariffs on import of Chinese goods worth $200 billion. That trade war development brought to halt a recent upsurge in US stocks which had helped to push the Nasdaq Composite Index and S&P 500 index to reach touch record highs as recently as last Friday.
Some analysts believe that the timing of the Uber IPO was not appropriate.
Uber had expected some turmoil in the market, said the ride hailing company’s Uber CEO Dara Khosrowshahi to the Wall Street Journal. “We knew we’d have a volatile day ahead of us,” he said.
But even though the US markets staged a recovery of sorts driven by a perception of betterment of the US-China trade war situation despite the new tariffs imposed by the Trump administration, Uber’s stock price failed to match the borader market sentiment throughout the trading day.
For example, there was a 114 point or 0.4% increase in the Dow Jones Industrial Average by the end of the trading session on Friday at 25,942.37, after touching a low of 25,469.86 thereby loosing as many as 358.5 points at its nadir. It was one of the worst weeks for equity markets of the year.
A gain of 14% has been the average return for IPOs recently, said Matthew Kennedy, senior IPO market strategist at Renaissance Capital.
There were many investors who were supporters of the range of businesses of Uber which include Uber Eats and other ventures, when compared to Uber’s US rival in the ride hailing industry Lyft – whose IPO has not gone well since it was launched in march this year.
(Adapted from MmarketWatch.com)