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Uber Technologies Inc reacted to the fallout from the Lyft initial public offering by lowering the IPO price in an attempt to lessen any negative impact, that was not the case. $UBER shares Fell 7.62%, losing over $200 million, the 5th biggest loss for an IPO in 30 years.

Where is my Uber

After the Lyft and Pintrest IPOs this has been the most anticipated listing since Facebook Inc, The big question is how will $UBER and $LYFT in particular affect other tech unicorns?

Uber is an example of a manic market phase for many, the loss making idea with no sizable barrier to entry, to others it is an opportunity to be in play with some of the sharpest minds on a market leader. Yet others point to the shady tricks of LYFT and UBER, the striking drivers and the arrogance and disconnect of the UBER founders and underwriters.

UBER Day One - Not Pretty

UBER Day One

UBER had been considering going public for at least four years, many argue they didnt because they kept over valuing themselves with self importance and old fashioned greed, they constantly wanted more and the latest private investors were seeing stars. Yet they really mistimed this one for maximum affect.

Firstly they came out AFTER Lyft and missed the inital ride hailing overplay by investors and brokers. Secondly as luck would have it they picked a week of market turbulence with the U.S.-China trade war front and center. Thirdly, and one that seems amateur at best, given the fallout from smaller rival Lyft Inc’s post IPO shares collapse they timed it to come just after Lyft was to report first earnings as a public company.

LYFT Public Life

Lyft ended down 6.9% on Friday, and is 28 percent below its IPO price.

UBER knows the game, first IPO earnings get out all the dirty washing, they knew themselves how large the losses couldbe. UBER thmselves were saying a $1 billion loss for themselves in Q1. In a nutshell the week of their IPO the news cycle would be full of massive losses for ride sharing comapnies. This in a week where drivers, their big expense were striking for more money. They knew the calender, so it brings us back to greed and disconnect from reality.

UBER is another an example of risks in IPO for investors but also the risk of greed and hanging on too long.

Uber has been touted as the biggest and best of a group of Silicon Valley startups that have spent years raising money in private rounds at record prices, the unicorns that helped fuel the greed and delusion. Uber and Lyft, are both unprofitable and simply may never be, one may survive, both may, a new player may come a long? There are risks in these things.

For the next IPOs first test is likely Workplace messaging company Slack Technologies Inc which plans to hold an investor presentation on Monday ahead of its IPOnext month. We have others that fit the bill expected to IPO this year including Grocery and food delivery platform Postmates, WeWork owner The We Company and online mattress retailer Casper Sleep. For the founder and initial investor going public it is all in the timing, UBER hasn't done a good job of that. How will it affect others?

We have been on a massive stock rally, the NASDAQ has been almost vertical and it is worth noting in that scanario only about a fifth of IPOs have ended their first day of trading in the red in the last two years, according to Dealogic data. Despite this environment and Uber pricing its IPO on Thursday at the low end of its targeted range it was still crushed forst day out. 

Do Unicorns Exist?

UBER Losses For Investors Over $200 Million on Day One

IPO Losses UBER

At current prices $UBER looks to be the 5th-largest dollar loss for investors in any IPO in the past three decades.

via George Pearkes @pearkes

UBER managed to crack an unwanted top 5, the biggest losers of investors money. THis hurt the big boys and girsl but also the small investor, sucked in by the hype and delusions of a sure fire bet.  Retail investors at TD Ameritrade executed more trades in the first ten minutes of Uber’s debut than in Lyft’s first 2-1/2 hours.

Uber had already lowered its valuation expectations twice in the last two months to address investor concerns over its mounting losses.

UBER Investor Winners and Losers

Early-stage Uber investors included Benchmark, Menlo Ventures, First Round Capital and Lowercase Capital clearly made a bundle. Uber's first round of funding in 2010 was for $1.25 million at a reported valuation of $4 million. Late late-stage investors are under water at these prices.Japan’s SoftBank Group Corp invested in Uber in early 2018 at $48.77 per share, it did average down with shares at a much lower price in a large secondary transaction. The Saudi Princes and Alphabet are other major investors.

UBER Shareholders at IPO

Uber Chief Executive Dara Khosrowshahi from NYSE trading floor at the launch tried to calm investors by directing them to the company’s growth prospects and expansion plans.

“My reaction (to the share price) is if we build and build well, shareholders will be rewarded. We’re certainly not measuring our success over a day, it really is over the years,” Khosrowshahi told Reuters.

What about the Risks

It does boggle the mind of many analysts the love for UBER at lofty levels, not just from its losses but it has been a magnet for scandal. The company has been subject increased regulation in several countries which means more costs and less revenue. It is subject to strike action with it's  drivers over wages. There have controversies including revelations of a culture of sexism and bullying at Uber and U.S. Department of Justice investigations.

UBER Losses IPO

Ealier CEO Kalanick was forced to resign in 2017 by a group of investors over many of the contoversies. Uber then hired Khosrowshahi to lead the company. Uber sells it's dream as more than ride hailing, they see themselves as a “superapp” to provide logistic services, such as grocery and food delivery with "UberEats" for example, organizing freight transportation, and even financial services.

Wary market veterans, who have seen a bubble ot two just see a company that has consistently posted losses that may never be profitable.

“The business is unprofitable, new entrants can enter the market, there is potential regulatory risk, and it is very price sensitive. What is there to like about this opportunity?” Robert Johnson, professor of finance at Heider College of Business, Creighton University in Omaha, Nebraska said.

Sources: UBER SEC Filing, Reuters, TradersCommunity, Google

From The Traders Community Research Desk

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