Uber Off to a Rocky Start in Stock Market Debut as Stock Slips 7%

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【Summary】Uber Technologies Inc's stock opened Friday down 6.7% in its first day of trading on the New York Stock Exchange. Uber’s listing today was the ninth-largest U.S. IPO of all time.

Eric Walz    May 10, 2019 12:12 PM PT
Uber Off to a Rocky Start in Stock Market Debut as Stock Slips 7%
A banner commemorating Uber's IPO on Wall Street. (Photo: Michael Nagle-Bloomberg)

Uber Technologies Inc's stock opened Friday down 6.7% in its first day of trading on the New York Stock Exchange in the biggest tech IPO since Facebook in 2012 and one of the most anticipated IPO's ever.

Uber sold 180 million shares for $45 each Thursday, the lower end of its $44 to $50 per share target range and share opened slightly lower $42, leaving the company's market value below its last private funding round.

Uber's listing today was the ninth-largest U.S. IPO of all time and the biggest on a U.S. exchange since China's Alibaba Group Holding Ltd.'s $25 billion global record holder in 2014, according to data compiled by Bloomberg.

Shares are trading under the ticker symbol "UBER."

Uber's strategy to price its oversubscribed IPO more conservatively at $45 per share was meant to avoid Uber's chief rival Lyft's 30% stock drop following a strong debut in March. Lyft, which is also based in San Francisco, became the first ride-hailing company to go public on March 29, beating Uber to the public markets.

Uber's main rival Lyft priced its IPO much higher at $78 and it quickly fell below that in the following days. As of 2:00pm EDT today, Lyft's stock was trading at $52.27, down 3.37%.

Uber shares were down less than 1% to $44.30 at 12:45 p.m. in New York Friday, giving the business a market valuation of $74 billion. Uber last major fundraising round came from Toyota Motor Corp. in August 2018 at a valuation of about $76 billion.

Earlier today, Uber's stock dropped as much as 8.8% to $41.06 as U.S. equities extended losses, with the S&P 500 poised for its biggest weekly drop this year.

The timing of Uber's IPO comes as the U.S. and China try to hammer out a trade deal, which has been weighing heavily on financial markets. President Donald Trump hiked tariffs from 10 to 25% on $200 billion in Chinese goods after a trade between the two countries could not be reached by Friday's midnight deadline.

Uber's debut on Wall Street culminates a rapid rise for San Francisco-based Uber. The company startup operating a handful of cars in a few cities a decade ago to becoming the world's largest transportation provider completing millions of rides each day. Uber took a novel idea and used emerging smartphone technology to redefine how people get around.

However, Uber rapid growth was not without controversy. The company was accused fostering a toxic workplace culture, which included multiple accusations of sexual harassment. The company also developed illicite software to hide its operations from local regulators.

As a result, Uber's CEO and co-founder Travis Kalanick was forced to resign in June 2017 amid pressure from five biggest Uber investors, including venture capital firms Benchmark, First Round Capital and Menlo Ventures. Uber's current CEO Dara Khosrowshahi was hired from travel company Expedia Group in August 2017 and tasked with cleaning up the company's image and get back in good standing with regulators to prepare Uber for an eventual IPO.

Uber is a long way from becoming profitable, and despite its extremely high valuation.

The ride-hailing company lost $3.04 billion last year on an operating basis on revenue of $11.3 billion, bringing total operating losses over the past three years to more than $10 billion, according to filings.

"Uber's opening trade shows investors aren't willing to pay a premium valuation yet for the ride-sharing company's ability to sustain a high top-line growth" said Mandeep Singh, a senior technology analyst for Bloomberg Intelligence.

In distributing the stock, Uber prioritized institutional investors that are more likely to hold the stock long term, according to a person familiar with the matter who spoke with Reuters.

In the future, Uber plans to integrate its ride offerings with local mass-transit in major cities, expand its freight and logistics businesses with Uber Freight, as well as expand its food delivery business Uber Eats. Uber Eats is one of the fastest growing areas of Uber's businesses.

Morgan Stanley, Goldman Sachs Group Inc. and Bank of America Corp. led today's listing.

resource from: Reuters

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