The disastrous Uber IPO
As we indicated in our IPO analysis of Uber “Why the Uber IPO is all about network effects”
the valuation was priced aggressive and especially against Lyft. In addition we updated our views on Twitter as the pricing date (last Thursday) approached.
First Uber said that demand was strong enough to price shares in the high end of the price range ($44-50 per share) but then settling for $45 on the actually pricing date as sentiment soured as Lyft’s shares continued to make new lows. We were not optimistic on Uber and we were indeed vindicated on Friday with the share price down 7.8% from the peak at $45 which was reached shortly after opening at $42.
Investors are increasingly worried over the spending spree of on-demand ridesharing companies and the biggest risk looming, besides regulation of course, is the business model’s robustness against a recession. Our suspicion is that the business model is not robust but time will tell. Uber 1-min chart on first day of trading (Friday):