Uber Technologies trades below last private value in rocky post-IPO start

Uber Technologies fell in its trading debut, leaving the company’s market value below its last private funding round.

Shares of the ride-hailing giant opened at $42, under their IPO price of $45. They were down 2.7 per cent to $43.85 at 2.38 pm in New York on Friday (12.08 am IST on Saturday), giving the business a market valuation of $74 billion. Uber last raised money from Toyota Motor in August, at a valuation of about $76 billion.

The stock earlier dropped as much as 8.8 per cent to $41.06 as US equities extended losses, with the S&P 500 poised for its biggest weekly drop this year. Trade tensions between the US and China are weighing on investors’ minds after President Donald Trump boosted tariffs on $200 billion in goods from China. Uber sold 180 million shares for $45 each on Thursday, after marketing them for $44 to $50 apiece.

Even at the low end of the price range, Uber’s listing was the ninth-largest US IPO of all time and the biggest on a US exchange since Alibaba Group Holding’s $25 billion global record holder in 2014, according to data compiled by Bloomberg.

In distributing the stock, Uber prioritised shareholders — particularly institutional investors — that it thinks will hold on to the shares for a long time, according to a person familiar with the matter.

“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.

A market value of less than $75 billion is a considerable climb down from earlier projections: Last year, bankers jockeying to lead the offering told Uber it could be valued at as much as $120 billion in an IPO. 

The trading debut will be closely watched by the cavalcade of other tech start-ups that are expected to go public this year, including Slack Technologies, Postmates, Peloton Interactive and Airbnb.

Shares are trading under the ticker “UBER”. Morgan Stanley, Goldman Sachs Group, and Bank of America led the listing. This year, widely expected to be the busiest for mega US tech listings this century, got off to a rocky start as a partial government shutdown shuttered the agency that approves IPO documents for 35 days, all but killing activity in the first quarter. After submitting its confidential filing in December, Uber, along with Lyft and a host of other hopefuls, was left sitting on the sidelines while US stocks enjoyed the best start to a year in at least a decade.

Like many of the IPO class of 2019, including Lyft and Pinterest, Uber is unprofitable. The San Francisco-based 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.