The simple truth is that investors are struggling to gauge just how valuable both Uber and Lyft are, and whether their stocks are poised to rebound similarly to other massive IPOs that struggled out of the gates before posting extreme gains (think Facebook and Amazon).
"If we build and build well, shareholders will be rewarded", chief executive Dara Khosrowshahi told Reuters.
Uber stock is taking a beating today, down nearly ten percent, in its second day of trading on the New York Stock Exchange.
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"While it might be easy to call out "market conditions" for these failings", wrote Nicholas Colas, a co-founder of DataTrek Research, in a message to clients on Monday about the decline in Uber and Lyft stocks, "the unvarnished truth is that these declines represent a fundamental disconnect between public and private valuations".
Uber CEO Dara Khosrowshahi, third from left, attends the opening bell ceremony at the New York Stock Exchange, as his company makes its initial public offering, Friday, May 10, 2019.
Still, Uber shares extended losses into Monday, sinking below US$38 per share, even as USA equities stabilized on renewed optimism that an all-out trade war can be averted. "But it is essential for us to keep our eye on the long-term value of Uber for our customers, partners, drivers, and investors".
"Remember that the Facebook and Amazon post-IPO trading was incredibly hard for these companies", he said.
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This could be valuable knowledge as we look ahead to more tech companies moving towards going public. But we have all the capital we need to demonstrate a path to improved margins and profits. First, the timing of Uber's IPO coincided with a general "risk off" pivot amid Sino-American trade war concerns, she said. Analysts say that Uber must execute flawlessly over the next 18 months to achieve a market value of $100 billion USA or more. "We believe this weakness in shares of Uber will be not be elongated as the core value of this franchise is markedly higher than these levels in our opinion".
Uber has never made a profit - and warned in its lengthy but lightly informative investment prospectus for the float that it may never do so.
Lyft is in a similar predicament. Given Lyft's inability to convince people to jump into the stock 23% lower from IPO day, it's hard to see how Uber management wins over a chorus of early bears. Its shares have been in a free-fall since debuting in late March, trading down 29% from its IPO price of $72.
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