Uber’s hopes of a surge in the price of its shares have fallen flat, as investors gave the taxi-hailing app’s eagerly anticipated stock market float a frosty reception by sending the shares below their launch price.
Uber put a price of $45 on its shares valuing the company at $80bn (£61.4bn), well below than the $100bn it had hoped to achieve, amid jitters among investors at the lacklustre performance of rival Lyft’s shares since its own recent float.
Early trading data from Wall Street showed that its shares were quickly changing hands at below the opening price in early trading, dipping to around $42 against the backdrop of a stock market suffering its fifth consecutive daily decline.
Despite its limp start to life as a public company, the $8.1bn that Uber raised means its stock market debut was still one of the largest in US history and the most closely-watched in the tech world since Facebook hit the market in 2012.
Chief executive Dara Khosrowshahi was on stage for the traditional ceremony at which executives involved in a listing ring Wall Street’s famed opening bell. One of the company’s original employees, Austin Gedit, pushed the button to ring the bell.
But co-founder Travis Kalanick, who resigned following a string of scandals relating to the company’s corporate culture, was nowhere to be seen, despite being the largest individual shareholder with 6.7%.
As trading commenced, shares in the company were being valued as low as $42, a start that will be viewed as disappointing given the hype around the company.
The performance is thought to have been affected by the dismal float launched by smaller rival Lyft, whose shares have been in steady decline since its own float at the end of March. Lyft also lost ground on Friday, falling by more than 7%.
Uber has also never made a profit – and warned in its lengthy but lightly informative investment prospectus for the float that it may never do so.
By issuing 180m new shares at $45bn, Uber raised around $8bn to fund its growth plans, including a multi-billion dollar investment in driverless cars.
The listing also meant that a select group of early investors have made billions of dollars between them because the value of their investments has been crystallised.
Some have also sold shares to new investors, cashing in on their investments, some of which were made when the company was valued at less than $1bn.
Despite Uber’s slow start, analysts at Los Angeles based investment firm Wedbush said they expect its share price to rise to $65, which would value the company at $118bn.
They said: “The brand loyalty of Uber is hard to dispute as the company continues to attract drivers and consumers illustrating an impressive formula to go after a $5.7 trillion opportunity globally on transportation which swells to $7-$8 trillion when including third-party food delivery and freight/logistics.”
Jordan Hiscott, chief trader at ayondo markets, said Uber may have been too ambitious in its valuation target.
“I find it intriguing that investors would want to participate with this valuation as high as $82bn, whilst still being a loss making company,” he said.
“Admittedly that’s in the extreme short term and for balance I actually find the company interesting on a longer term basis- mainly for its ability to harness the gig economy whilst also changing how we view and use automobiles for transport.
“Lastly the IPO felt a tad rushed, with general financial market conditions not ideal for such a highly priced listing at the moment. Perhaps there was a reasoning that given the potential headwinds later in the year, now was as good of a time as any.”