Uber's humbling open
EDITOR'S NOTE
Uber shares opened for trading at about 11:51 a.m. ET, and it ain't pretty.
The company priced its IPO at $45 last night, but couldn't hold that level for the open. The first indication was in the $46-48 range, but that fell to $42-43. The opening trade was at $42 on the nose. It did dip below that and is hovering in the $43 range right now.
At $45, Uber is roughly a $75 billion market cap company. It's not anywhere near the $100 billion IPO that for years was conventional wisdom.
It's very rare for an IPO of this size and stature not to open above its IPO price. The last one of any real substance was ADT last January, which priced at $14 and sank to $12.39 on the close, in what the WSJ called a "black eye" for Wall Street's underwriting business.
At the time, that was the worst pricing miss for a $1 billion+ IPO since 2013, according to the Journal and Dealogic.
You could blame the market backdrop, which isn't great today with the Chinese tariffs going into effect and the Dow down more than 300 points. But it's pretty clear that the public markets just aren't that hot on the ride-sharing business models of Uber and Lyft. Lyft is down 7% in sympathy, to around $51 right now.
Now, the early trading days aren't the lasting say on these companies. Facebook, the last big IPO debacle, was down 20% in its first three days. Its shares were sliced basically in half until the company proved it could transition to mobile.
But Uber and Lyft have a deeper problem: not pulling off a one-time shift to, say, mobile, but rather showing that their business model actually works. As Stratechery's Ben Thompson pointed out, even figuring out what their ride sharing business economics are right now is extremely difficult based on Uber's disclosures.
Especially after Beyond Meat's incredibly hot IPO, I doubt this will chill the IPO pipeline--except for any other ride-sharing companies.
As for Uber, the pressure is on to prove it can be a profitable business.
Much more at 1 p.m.! See you then!
Kelly
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