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Uber tumbles 9pc in rocky launch

Updated May 11, 2019

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NEW YORK: Protestors display a banner outside the New York Stock Exchange (NYSE) as Uber Technologies Inc. holds it’s IPO on Friday.—Reuters
NEW YORK: Protestors display a banner outside the New York Stock Exchange (NYSE) as Uber Technologies Inc. holds it’s IPO on Friday.—Reuters

NEW YORK: Uber Technologies Inc’s shares fell nearly 9 per cent in their New York Stock Exchange debut on Friday, marking a rocky start for one of the most high-profile US companies to go public since Facebook Inc seven years ago.

The fall in shares undermined Uber’s strategy of pricing its oversubscribed IPO conservatively at $45 per share to avoid a repeat of rival Lyft Inc’s stock market struggles following a strong debut in March.

Uber’s shares opened at $42 and touched a low of $41.06 in early trading before recovering most of their losses to trade down 2pc at $44.17 by 1610 GMT. Lyft was down 4pc, well below its IPO price.

The lackluster market response comes against the backdrop of a spike in trade tensions between the United States and China and increased investor skepticism about Uber’s ability to turn profitable soon enough.

Nelson Chai, the company’s chief financial officer who was at the NYSE to mark the first day of the stock’s trading, said in a CNBC interview that he was not focused on one day of trading and was more concerned about the company’s long-term outlook.

The IPO marks a landmark moment for the decade-old company, which was started after its founders struggled to find a cab on a snowy night and grown into the world’s largest ride-hailing company, making more than 10 billion trips.

The company’s road to IPO was marred by several hurdles including increased regulations in several countries and fights with its drivers over wages.

Uber has said that it has the potential to grow not just in the cab hailing business, but also as a “superapp” to provide a variety of logistic services, such as grocery and food delivery, organising freight transportation, and even financial services, much like Grab, its Southeast Asian counterpart.

But market experts have struggled to find value in a company that has consistently posted losses, and warned that it may never actually 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.

As a private company, Uber has raised more than $15 billion from investors to fuel its growth and expansion into food delivery and freight hauling, with little regard for turning a profit. Uber reported a loss of $3.03bn in 2018 from operations.

Published in Dawn, May 11th, 2019