Uber’s share price has recovered after early selling and is back at its IPO price, which was the bottom of the range it was marketed at. That is far below the double-digit gains which investors expect in the early days of a tech unicorn trading. Meanwhile, Lyft is still 23% below its IPO price.
Uber’s roadshow was full of bold promises and high ambitions to rival Amazon as a logistics and delivery company.
The company has always been ambitious, but its fundamentals — not its dreams — are important to IPO investors. No amount of ambition can hide the fact that Uber is still loss-making and that its road to profitability depends on driverless vehicles — a promising, but nascent technology fraught with all sorts of perils.
It was unlucky to be in the market at the same time as renewed trade hostility between the US and China, but the startling lack of early conviction investors have shown in the stock illustrate fragile confidence.
The stock’s performance indicated a difference in focus between private and public investors. While private investors were happy to buy Uber stock at ever-more astronomical valuations based on the company’s lofty promises, once the stock went public, IPO investors showed scepticism.
Investors are eager to play with the next member of the Faang club — Facebook, Apple, Amazon, Netflix and Google — but they risk being bitten. Uber, Lyft and Snap are just three of the companies that have caused investors to wince.
Big tech could do with delivering for shareholders to justify astronomical valuations. Instead of farting rainbows, they should prioritise laying a few gold bricks.