It was a surprise for a lot of people on the day of debut of Uber IPO as plenty of people though Uber was going to make history–just not this kind.
Shares of Uber stalled on their first day of trading Friday, falling 7.6% to just under $42 amid mounting trade war tensions.
On a dollar basis, it is estimated that investors who purchased the 180 million shares offered through the IPO at $45 per share collectively logged $618 million in paper losses Friday. That represents the worst dollar losses for a U.S. IPO going back through 1975, excluding foreign stock listing in the country via American Depository Shares.
In terms of the share price drop, Uber’s IPO ranks as the ninth worst first day performer of all time, according to DealLogic.
That puts further pressure on investors including Saudi Arabia’s sovereign wealth fund, who bought in at a time when shares were higher than $45.
The sell-off came as President Donald Trump escalated the trade war with China, boosting tariffs on some $200 billion worth of goods from 10% to 25% Friday. Investors have also been somewhat jittery about Uber, after its rival, Lyft, also had a lackluster IPO. Shares of the latter firm are down 35% since their debut in April.
First day trading doesn’t determine a company’s future, however. (Remember Facebook’s flop?) And while IPOs are often priced to “pop” on the first day, critics of the practice argue that it leaves cash on the table—cash that investors were willing to pay, but the company ultimately did not take to grow its business.
Regardless, this probably is not the kind of history the transformative company hoped to make on its first day as a public company.
Even by the standards of ambitious, lossmaking technology start-ups, burning through $2 billion in cash a year this late in its existence seems wildly extravagant. But in their meetings with investors in recent days, the company’s bosses gave no indication when they expect to make a profit.
Instead, they sought to sell the ride-hailing company as a once-in-a-generation opportunity: a chance to back a business with the potential to fundamentally change transport and transform markets that Uber — with typical immodesty — values at about $12tn.
Each era of tech can lay claim to its defining initial public offering. The arrival of Google, Facebook and Alibaba were all landmark stock market events over the past 15 years, signalling in turn the rebound of the consumer internet after the dotcom crash, the rise of social media and the arrival of China’s internet powerhouses on the world stage.
There is a good chance that Uber’s stock market debut will define the era of the “unicorns” — the large number of tech start-ups valued at $1 billion or more that have been pumped up by money flooding into the private financing markets. If so, it could mark a more problematic moment in financial history.
Uber’s first minutes as a public company were not auspicious. Its shares opened $3 below its IPO price on Friday, a rare flop for such a hotly anticipated share sale. Yet the scale of its ambition seems almost unbounded. The automobile industry, restaurants, haulage companies: all of them, according to the San Francisco-based company, are about to have their worlds disrupted by an app that lets users summon a ride, order food or arrange road freight.