Well the Uber IPO finally happened, and it was a disaster. On Friday, May 10th, 2019 Uber launched its initial public offering on the New York Stock Exchange starting its stock price at $42 a share.
The stock quickly dropped to $41 right out of the gate; however; some investors thought of this as a buying opportunity as the stock price began to rise to $44.77. Although $44 is a positive handle for Uber, many market analysts such as Jim Cramer thought the share price would reach at least $46.
Cramer warned: “They have to get it to 46 if UBER does not want to be the end of the unicorn era.”Jim Cramer
However, by the end of the close Uber’s IPO stock price ended at $41.40, below the initial opening offer of $42 and analyst expectations. What I find surprising is the market reaction. They do not understand why the IPO stock price fell, so many were betting that Ubers IPO would reach $46 or more. Even Morgan Stanley bank had an agreement to stabilize the IPO at $45, well that didn’t happen.
Morgan Stanley has to stabilize UBER IPO at $45 per the agreement; it is facing tens of millions in losses.
According to one CNBC guest analyst, the Uber IPO is a trainwreck.
As one CNBC guest noted, “this is a trainwreck.”CNBC
Largest IPO to Launch with Massive Operating Losses
A trainwreck indeed, however, to think this would not turn out to be a trainwreck is mindboggling. Uber, a company with the most massive operating losses to ever go public, went public and expected positive results? When people invest in a stock, they do so with the expectations of making money.
Furthermore, how is one to make money investing in a failed business model? As I stated previously, Uber has been in operation for ten years and not once had it made profits from services. However, for some reason analyst think this company is a good buy, why? Because it’s popular? Popularity doesn’t make one money. It’s great for marketing but doesn’t mean the brand is valuable, and Uber certainly isn’t profitable.
The Uber IPO could be a sign that the easy money is beginning to shift away from these failed business models. Investors are starting to notice that companies like Uber and Lyft, are not likely to make money or if they do it’ll possibly take another ten years or more.
One thing is for sure, Uber’s IPO certainly was a trainwreck, and I believe the wreck is so damaging that salvaging this train will be impossible unless this train starts making money and fast. And to do so Uber is going to have to make some drastic changes.