Uber's hype dissolves and IPO joins ranks of Wall Street flops

Uber's hype dissolves and IPO joins ranks of Wall Street flops”

After Uber Technologies Inc.'s US$8.1 billion initial public offering, investors in the ride-hailing company were arguably less than thrilled when the stock immediately opened today more than 6 per cent below its US$45-a-share offer price. By noon, it was trading at $44.63.

The stock earlier dropped as much as 8.8% to $41.06 as US equities extended losses, with the S&P 500 poised for its biggest weekly drop this year.

Uber offered 180 million shares of common stock with an option for underwriters to purchase an additional 27 million shares in the next 30 days.

Matt Kennedy, a senior IPO market strategist at Renaissance Capital, says that over the past five years, just 10 per cent of USA technology companies backed by venture capital finished their first day of trading below their IPO price.

Shares will now trade under the symbol UBER, after the most anticipated USA debut since Facebook in May 2012.

"Similar to Lyft, we see a hard path to profitability for Uber as well, but think Uber's larger global network will help and we note we see an easier road for Uber Eats and Freight, which may help offset some of the challenges." .

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That's highly unusual, especially for a high-profile tech company like Uber. Lyft was down 4 percent, well below its IPO price. How is "be willing to lose more money than the other guy, for longer" a viable business strategy, and why would anyone pay any amount of money to invest in it? The shares debuted at $42, well below the IPO price.

Since its foundation in 2009, the company has lost about $9bn. Its total operating losses over the past three years were more than US$10 billion, according to filings. It's now his job to make good on that promise, guiding the company to growth in new markets and its current ones, and building competitive advantages that eventually generate significant profits.

"The most important sort of statistic to look at is bookings, because that reflects essentially what people are paying for the service", he said.

The San Francisco-based company last raised private capital from Toyota Motor Corp in August at a valuation of about US$76 billion. By the time the closing bell rang, Uber shares had fallen 7.6% to end at $41.57. "Now we have to execute to make sure that the bet that they made on us is a great bet". Kalanick avoided the press while there, but some investors have speculated that he could try to stage a comeback at some point as he still feels scorned at being forced out of the company that he helped build. Kalanick owns 8.6% of Uber, making him a billionaire many times over now that Uber shares are freely traded.

Uber priced its IPO on Thursday at the low end of its targeted range, hoping that approach would spare it the trading plunge suffered by Lyft.

There are a few reasons why Uber's shares failed to rise. Initial reports suggest that the Uber's bankers, Morgan Stanley and Goldman Sachs, had misjudged the demand.

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