Its CEO says trade tensions between the US and China played a role in the stock’s weak performance

By BLOOMBERG

NEW YORK • After the biggest initial public offering (IPO) of the year, Uber Technologies Inc ended its first day of trading last Friday below its last private valuation.

The deflated debut cast a pall over 2019’s prospects as the hottest year for tech listings this decade — and potentially on the future of the ride-hailing industry.

It took more than two hours for the stock to finally start trading after Uber executives and drivers congregated at the New York Stock Exchange for the bell-ringing ceremony. The shares debuted at US$42 (RM174.72), well below the IPO price of US$45.

A tense wait for those gathered on the trading floor turned into a jittery start for the newly public company, which touched its intraday high and low prices within the first hour of opening.

Uber closed at US$41.57, giving it a market capitalisation of just US$69.7 billion.

The San Francisco-based company last raised private capital from Toyota Motor Corp in August at a valuation of about US$76 billion.

Uber CEO Dara Khosrowshahi said in an interview on the floor of the exchange last Friday that trade tensions between the US and China played a role in the stock’s weak performance.

US President Donald Trump had moved overnight to slap fresh tariffs on Chinese goods.

“You can’t pick when you go public,” Khosrowshahi said.

But Uber shares extended losses into the close, even as US equities stabilised on renewed optimism that an all-out trade war could be averted.

The tumultuous debut makes Uber the newest member of a stock market club no one would choose to join: Since the start of the decade, just seven other companies that raised more than US$1 billion in their IPO have ended the first day of trading in the red.

Uber’s inauguration as a public company was sure to be closely watched by the cavalcade of IPO hopefuls lining up to list in 2019.

That crop includes Peloton Interactive Inc, Postmates Inc, Slack Technologies Inc and WeWork Cos, all of which have preparations in progress to go public this year.

Len Sherman, a professor at Columbia Business School, said while too much attention is paid to trading on Day One, Uber has provided enough financial information in the run-up to the IPO for investors to know what they’re buying into.

“The market has reacted negatively to a shared reality that both Lyft Inc and Uber are struggling with a fundamentally broken business model,” he said. “Uber has lost more money faster than any start-up in history, with no clear path to profitability.”

Uber’s losses just last year totalled US$3.04 billion on an operating basis, with a revenue of US$11.3 billion.

Its total operating losses over the past three years were more than US$10 billion, according to filings.

Khosrowshahi said while profitability is a priority for the company, public market investors should be judging Uber by a different metric once it starts reporting quarterly earnings.

“The most important sort of statistic to look at is bookings, because that reflects essentially what people are paying for the service,” he said.

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

“We found a set of investors who are long-term oriented, that believe in our vision,” Khosrowshahi said. “Now, we have to execute to make sure that the bet that they made on us is a great bet.”

Uber sold 180 million shares for US$45 each Thursday, after marketing them for US$44 to US$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 Ltd’s US$25 billion global record holder in 2014, according to data compiled by Bloomberg.

A market value of less than US$70 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 US$120 billion in an IPO.

Shares are trading under the ticker UBER. Morgan Stanley, Goldman Sachs Group Inc and Bank of America Corp led the listing. — Bloomberg