Uber became a publicly traded company today with its initial public offering of stock valued at $45 a share on the New York Stock Exchange, but quickly lost value as it started selling at $42 a share almost immediately.
Uber Falters Out the Gate Even With Low IPO Price
Uber launched its IPO today on the New York Stock Exchange at the very low end of the price range it was considering, $44 to $50 a share, with an initial price of $45 but it fell almost immediately to $42 a share.
“The sound you hear of the stock dropping is the sound of the bubble bursting for high valuations in the private markets,” said Renaissance Capital’s Kathleen Smith, an ETF Manager with a focus on IPOs. “With a big money-losing company like this, it’s been very hard to have a lot of confidence in what it’s worth.”
The company had been expecting a valuation as high as $120 billion as it prepared to go public, but in its most recent private funding round, investors had valued it at just $76 billion after posting a $3 billion loss last year. Losses have been a major concern for Uber and smaller ride-share competitor Lyft, who have both failed to make a profit after years of development as well as controversy.
This week, Uber and Lyft drivers in major markets around the world went on strike to draw attention to low wages, as low as $9 an hour, which raises real questions about Uber and Lyft's ability to become profitable companies in their core business product. Both companies are putting a lot of faith in autonomous vehicles as being profit drivers, and this comes with problems of its own.
As Gizmodo's Brian Merchant writes, driver dissatisfaction is baked into the cake of both Uber and Lyft's business models: "Treating drivers as replaceable, disposable placeholders for algorithms is finally taking its toll. Uber even acknowledges as much in its IPO filing, which states plainly that the company plans to continue to slash wages. 'As we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase,' it notes. 'Further, we are investing in our autonomous vehicle strategy, which may add to Driver dissatisfaction over time, as it may reduce the need for Drivers.'
While both companies are banking on autonomous vehicles in the future to help them establish a profitable business, that is still some ways off, if ever, and there is already considerable skepticism among customers about the safety of self-driving cars. The roll-out will need to be slow if it's going to be effective and there is only so many losses a publicly traded company can sustain before many investors stop putting their money into the company. While there will be plenty of investors willing to accept short-term losses for long-term gain, Uber and Lyft will have much more competition in the autonomous taxi market than it currently has in the ride-share market, including companies like Tesla and Google.
This story is developing.