General stock market jitters and last week’s trade tension between the US and China have been among the explanations for the flop of the highly-anticipated initial public offering of Uber Technologies (NYSE:UBER). Investors meanwhile are preparing for another stock market bruising, with Uber’s share price standing nearly nine percent lower in early trade in New York this morning.
Analysts weigh in on Uber IPO flop
Uber’s stock tumbled on Friday on its market debut, ending the day 7.6 percent lower, and giving the company a market cap of $69.7 billion. The ride-hailing service priced its IPO on Thursday at $45 per share, marking the low end of its guidance range. The move came after the company had already lowered its valuation in the run-up to the float, responding to investor concerns over losses, as well as to the lacklustre IPO of rival Lyft (NASDAQ:LYFT) earlier this year.
“The business is unprofitable, new entrants can enter the market, there is potential regulatory risk, and it is very price sensitive,” Robert Johnson, professor of finance at Heider College of Business, Creighton University in Omaha, Nebraska, commented, as quoted by Reuters.
Uber’s chief executive Dara Khosrowshahi meanwhile argued that the trade tensions between the US and China had played a role in the group’s weak performance during its first day of trading.
“You can’t pick when you go public,” Khosrowshahi said, as quoted by the Sydney Morning Herald. David Buik, market analyst at Core Spreads, also pointed to poor market sentiment last week.
“Last week was not a great day for the company and its advisors to hold the IPO,” he told City A.M., adding that Uber would need “need a strong supportive shareholder register to take it through these embryonic times, when growing pains will remain in evidence”.
‘Near-term speed bump’ or Lyft 2.0?
Some analysts meanwhile have pointed to the recent underperformance of rival Lyft, whose shares retreated to an all-time low last week.
“While the trade war has caused overall stock market volatility, we believe that the poor trading in Lyft was the major factor impacting Uber,” Kathleen Smith, co-founder of Renaissance Capital and manager of the IPO exchange-traded fund, told Bloomberg News. “Investors are applying the valuation multiples of Lyft to Uber. And as the Lyft stock dropped, so did Uber.”
Dan Ives, Wedbush Securities managing director, however, has taken a more positive view on Uber’s future following the IPO flop.
“We believe this is kind of a near-term speed bump, we don’t view this as a Lyft 2.0,” he said on Bloomberg TV, adding that this continued to be a ‘show me’ story.