UBER IPO Disaster : 800$ return on 1000$ investment

UBER Technology IPO was one of the most awaited events for the financial market and startup ecosystem alike, defined as one of the fastest growing Unicorn, UBER technology IPO became official with an opening share price of $45, valuing the company at $91B, way lower than its orignal assessment of $120B

Valuation Game

UBER clocked $11.3 B in revenue last year with a promise to become profitable by 2020, with losing close to $2B on a yearly basis, the CEO was pushing for the valuation of $120B pre IPO based on last rounds of funding and private stock assessment. Underwriters stacked against the odds of the market went ahead with the IPO at a lot of $91B with a $45 share value causing a disappointment to the investor community

UBER managed to raise a minimum of $8.1 billion even after losing money hands over fists over the year, it took 10 years to become public compared to recent Tech Investments in the same market where Facebook Inc. raised $16 billion through its 2012 offering, while Visa Inc. raised almost $18 billion in 2008 and Alibaba Group Holding Ltd. raked in roughly $25 billion in 2014.

While this rosy picture is being painted, UBER continues to suffer a business loss in the range of 2B $ on a yearly basis, losing business to Lyft which went public at a $72 share price but saw it sink to below $60 in the following weeks. Furthermore Uber has been selling its stock in private offerings to investors including SoftBank and Didi Chuxing at $48.77 a share. Those Investments went underwent instantly at IPO priced at $45 a share.

Leadership in Trouble

Personally, for CEO Dara Khosrowshahi, he has millions at risk with this IPO with 1.75 Million stock options on line conditional that the company acquired the boasted $120 B or see it’s Market Cap hit that amount and stay at it for 90 Days which is looking like a fairy tale more and more

It’s not just CEO, UBER granted 5.5 Million options last year along with 64.7 Million restricted shares spiked at $41.39 which could give them less than $5 advantage at the time of IPO and currently stock closed at $37 makes them lose close to $5 per share.

Investors left hanging

Some of Uber’s investors and insiders are likely going to be disappointed in the IPO, the company sold all its holding rather than selling the shares held by early investors or insiders thus forcing them to dedicate the share to UBER’s overallotment pile, which was purely their shares which the underwriters will buy from the company at IPO price in case of excessive demand or need to stabilise the market.

The Bankers don’t have to necessarily buy from the company, even if they have to sell to institutional investors. With UBER’s share trading way below the IPO price, Bankers can buy the shares from the open market at a lower rate and sell at convenience. This would make perfect financial sense and would leave the early investors hanging as their contract prevents them from selling the shares outside the over-allotment pile for a long duration of time.

Market Game

UBER Opened on Friday on the $43, $2 mark lower than its IPO price, opening with a huge loss and closed at a low of $41.55. In the process, investors lost roughly $655 Million closing at an 18% loss over the weekend. Monday it opened at a low of $38.83 and continued to plummet all day closing the day at $37.25 at a 17.2% loss.

So if you invested 1000$ into UBER at IPO you would only be left with 828$ right now.