
Uber opens at $42 per share - kgwgk
https://techcrunch.com/2019/05/10/uber-ipo-trading-debut/
======
chollida1
Some notes from watching Uber open:

\- if it closes below $45(its IPO price) it will be the first time since 2008
that the happened for a major IPO

\- TD Ameritrade executed more orders in the first 10 minutes of trading than
they did for the first 2.5 hours with Lyft.

\- Uber is 9% of all trading at TD Ameritrade, retail loves this stock,

\- market is down today, which isn't helping Uber but its probably not much of
a factor

\- Kudos to Citadel, stock opened without a hitch and they seemed to nail the
opening price,

\- Boo to the underwriters(Morgan Stanley), who seemed to misjudge the
market's appetite, important to note that major buyers at IPO, Fidelity and
such already had exposure to Uber pre IPO so maybe this staying private longer
but selling shares to public fudns had an effect?

[https://news.yahoo.com/uber-employees-may-not-
partying-15171...](https://news.yahoo.com/uber-employees-may-not-
partying-151719950.html)

\- interesting piece on how Uber has grown its market cap in the past few
years at the expense of its share price and how that effects later employees.

\- later investors like the Saudi Public Investment Fund can’t be happy with
the opening.

\- from Bloomberg without comment...."Overheard trader on the floor: “That’s
what you get when you don’t make a profit. If you don’t make money, people
don’t want to buy you.”

\- Biggest IPO since Facebook, that's something to be proud of!!

Date:

\- June 4 is expiration of 25-day quiet period for analysts at underwriting
banks. Expect bullish initiations on this date

\- Nov. 6 expiration of Uber's IPO lockup. Large selling pressure expected to
be asserted on this day as is typical for most IPO's.

Personal thought. It may be tough for employee's to not see this pop to say
$65-$70 but in the long run its almost certainly better to open flat than to
pull a "lyft" and get a first day pop that you price your options at in your
head and to then have to cut that price by 40% before you get a chance to
sell.

 __EDIT __for comment below.

~~~
carlsborg
Facebook was at ~$44 on the day it IPOed, and proceeded to fall over the next
month to about $19. Today its at $187.

~~~
almost_usual
Facebook was also profitable and had about 10x the number of users compared to
Uber pre IPO

[https://www.forbes.com/sites/greatspeculations/2019/04/22/ub...](https://www.forbes.com/sites/greatspeculations/2019/04/22/ubers-
ipo-valuation-makes-no-sense/#7c360cc540d3)

~~~
fooker
Uber has paying users. Facebook had advertisement targets.

Doesn't make too much sense to conflate the two.

~~~
baq
wait what?

facebook had paying users AND advertisement targets AND an ability for the
paying user to precisely target an ad at the product AND an extremely powerful
incentive for the product to not move to competition (product's friend
network).

out of the above uber has only paying users - who are ready to jump ship to
competition for a penny per mile.

~~~
fooker
Yes, nuance.

Just saying Facebook had 10x the user as Uber is meaningless.

------
busymom0
There's way too many comments in this thread comparing Uber's non-
profitability to Amazon's which I think is quite silly. Amazon lost $2.8
billion over its first 17 quarters while Uber lost $4.5 billion in 2017 alone.

Also comparing Uber to Facebook is quite silly too. Facebook had a lot more
users than Uber but they are also different types of users. One is a free user
with hope for targeted advertisement (in which the advertiser gains/loses
money) whereas the other is paid users/riders (but in this case Uber has been
losing money each ride and I don't see it changing). Also advertisement has
huge margins with not much cost from Facebook's pov but ride sharing logistics
is completely different with very little margin where the driver needs to get
paid. Drivers are already complaining that they are not getting paid enough
for rides and asking Uber to take lesser cut of the ride. So Uber can't raise
their cut over their current 20-25%. Facebook's advertisement business doesn't
have this problem. Nor does Amazon as they can make their logistics more
efficient.

Amazon is able to lower it's cost with economies of scale but I don't see Uber
being able to achieve that as their costs only increase as they scale as they
lose money on every ride. The only way I can see them become profitable is if
and when they achieve driverless cars, which they are betting huge on, but
that's a long way to go. Uber is betting on driverless cars to lower the cost
per mile. But I think Tesla will beat them to market much much before them
considering Tesla already has the tech. Elon even hinted on the Tesla taxi
fleet in the next couple years.

Now I realize Elon's got poor judgement on timing but I still think they will
be able to achieve that much earlier than Uber. And if they do, I honestly
don't see Uber & Lyft surviving.

~~~
foobarian
> Also advertisement has huge margins with not much cost from Facebook's pov
> but ride sharing logistics is completely different with very little margin
> where the driver needs to get paid

Why is this? In both cases it seems the cost is paying a bunch of servers and
engineers to run a website. So why is Facebook seemingly more efficient?

~~~
sfifs
Nope. Market share and pricing power in digital advertising comes from user
base and targeting capability. As an advertiser, I can reach most of the
population in many country through FB/IG and YouTube. Their targeting data is
also pretty good. So they claim a lion's share of the market. Also inventory
expands as userbase expands and the userbase doesn't really have other options
with similar network effects.

Uber on the other hand has plenty of competition. Their total cost to user has
to be competitive vs. not just taxis but possibly owning a car. There's only
so much they can charge for a ride and they pay a ton of incentives to get
drivers to drive for them in many markets. So the available space for
profitability is constrained.

~~~
foobarian
So basically advertising is less constrained on the upside than
transportation. The whole bit about 'they have to pay their drivers' is a red
herring - the real constraint is that the price the riders are willing to pay
is more constrained / lower than what advertisers are per user.

~~~
sfifs
That's part of it. The other part of it is that digital advertising business
models turn out to be close to zero cost. There's very little "product cost"
when you amortize tech cost over billions of ad impressions - the "cost"
really comes from "reduction in addressable market" \- ie. what portion of the
audience will stop watching the platform due to ads. At least for Google and
Facebook, the answer seems to be negligible proportion and in China at least,
publishers are finding that many of such people are willing to pay for an ad
free experience if you have killer content.

Taxi service is a much more constrained business - you have to pay out product
cost plus some incentive to generate supply but you have a strict price
ceiling on scaled demand and a lot of competition. The answer for the previous
generation of entrepreneurs in this space was to execute regulatory capture
and institute a system of restricted supply to boost prices (ie. Medallions,
permits etc). So it's going to be interesting to see how these businesses
evolve.

------
khazhou
According to this article, stock was valued internally at $49/share in __2016
__, so anyone joining in the last three years will not have enjoyed any sort
of rocket-ship growth.

[https://news.yahoo.com/uber-employees-may-not-
partying-15171...](https://news.yahoo.com/uber-employees-may-not-
partying-151719950.html)

~~~
intuitionist
If you’re joining a $60 billion company with thousands of employees expecting
rocket-ship growth, that’s kind of on you, I think. You wouldn’t expect that
from a public company; why would you from a similarly sized company that just
happens to be pre-IPO?

~~~
marnett
Amazon in 2016 was $502 a share, it is $1900 now

Microsoft in 2016 was $51, $127 now

Facebook was $97, $189 now

We're not even talking about rocket-ship growth here. We are talking about
option strike prices losing money in one of the most favorable economic time
periods where massive, healthy public business did have monstrous growth.

I would have at least expected price parity with other large companies - even
that assumption would have been wrong.

~~~
pavlov
The Silicon Valley giants don't do options anymore, but RSUs (restricted stock
units) which are simply share awards. There's no strike price to worry about,
but of course it's a bit of a disappointment if you expected Uber to be a
$100B company out of the gate.

Still, Uber employees will be happy that they can finally sell those RSU
awards (in six months when the lockup expires).

~~~
8ytecoder
I can’t speak for sure but that’s a little unlikely. RSUs are taxed on
vesting. Bad idea when employees can’t sell a portion of it to pay the tax.

~~~
pavlov
Uber, Airbnb and the rest definitely give RSUs. Details may vary but they may
use contracts like “double trigger vesting” where you don’t actually receive
the shares until they’re publicly traded.

------
khazhou
To add insult to injury for Uber's rank and file equity-holding employees: the
terms of Uber's stock offers (at least since 2016 if not earlier) say that you
cannot sell your shares until _one year after they officially vest_. That's
right, they tack on an additional one-year waiting period for each block of
shares awarded. So if you had shares that vested today, e.g., you can't sell
those even when the regular six-month lockup period expires... you have to
wait until May 2020.

(source: turned down offer in 2016 because of employee-unfriendly terms)

------
dannykwells
Given this price (and the likely downward trend to come if Lyft is any
predictor), I wonder if Uber and Lyft are really just an act of philanthropy
from SF VCs + SA to hungry/drunk/tired city-dwelling folk. If so, thanks guys!
(* and you mostly are guys). Next ones on me!

~~~
umeshunni
It's not the VC's money - it's money from wealthy investors and more recently
sovereign funds and even pension funds.

------
ufmace
Did I miss something? I thought Uber was still a long way from being
profitable and had no plausible plan for how to become profitable.

~~~
malvosenior
Just like Amazon at its IPO.

~~~
duxup
Maybe I don't remember it well enough but Amazon's business model seemed a lot
more ... tangible than Uber's don't you think?

~~~
dymk
In the 1997, Amazon's proposition of "Online retailer" was also pretty far
fetched. It wasn't obvious that their model was going to make them one of the
largest retailers in the world.

~~~
duxup
I duno, buying stuff online seemed like the way of the future at the time IMO.
When, how much and etc was just a matter of timing.

~~~
paulddraper
Doesn't ride sharing seem like the way of the future in your opinion?

~~~
visarga
Who's doing ride sharing? Certainly not Uber

~~~
paulddraper
> Uber Technologies Inc. is a transportation network company (TNC) offering
> services that include peer-to-peer ridesharing, ride service hailing, food
> delivery, and a bicycle-sharing system.

[https://en.wikipedia.org/wiki/Uber](https://en.wikipedia.org/wiki/Uber)

------
jdavis703
This is unfortunate for many of the rank and file Uber employees but it’s good
news for the stock market in general. It’s showing we’re not in a tech bubble
and companies are still going to be valued based on how strong their business
case is.

~~~
bfrog
With the burn rate uber has, it'll be bankrupt in < 2 years. There are no
other suckers to buy in after the public.

~~~
criddell
I've never understood why so many people were/are so bullish on Uber. I
understand that ride hailing is a big deal, but it doesn't feel like it's that
hard to launch a new ride hailing company.

I'm basing that opinion on what I've seen in my city. When Uber and Lyft left
Austin, there were lots of alternatives that had existed or popped up to fill
the space.

Aside from brand recognition, what does Uber have that the others don't?

~~~
lkbm
> When Uber and Lyft left Austin, there were lots of alternatives that had
> existed or popped up to fill the space.

I tried to use one or two of those alternatives. Setup was a pain and I ended
up taking a cab. I have at least one coworker who couldn't get a ride because
he was in South Austin.

Additionally. if your company is only in one city, visitors have to know
about, install, and setup a new app just so they can use you; it's just as
easy for them to take a cab. Last time I needed a ride in DC, I used the Lyft
app that was already on my phone. There was no friction in being in a
different city.

Maybe there was a local alternative in DC, but who's going to look up local
ride sharing companies and install yet another app when the app they already
use at home already works? Even hailing a cab is easier than installing a new
app for one or two rides while you're in a new city.

Uber and Lyft have network effects.

~~~
unreal37
Uber and Lyft have "network effects"? How? Explain that.

I couldn't tell you what car sharing service any of my friends use.

When I was in Malta earlier this year, there was no Uber. I downloaded an app
called Taxify while sitting at a cafe, and called a car from it. It's not a
huge barrier to download and install another app, even when trying to call a
car.

~~~
lkbm
> Uber and Lyft have "network effects"? > I couldn't tell you what car sharing
> service any of my friends use.

It doesn't matter if you know who uses it. It only matters that there are.
People are more willing to drive for it if there are plenty of users. If there
are more drivers, there's more likely to be one nearby when you request a
ride, so service is better. Better service makes for more riders. More riders
makes it more worthwhile to be a driver. Positive feedback loop based on
network size = network effect.

> I downloaded an app called Taxify while sitting at a cafe, and called a car
> from it. It's not a huge barrier to download and install another app, even
> when trying to call a car.

You know what's even less of a barrier? Not having to download and install
another app.

Maybe it's not a huge barrier to you, but you're a single data point. You're
talking to a second data point that's telling you that if I have a ride-
hailing app on my phone that works, I will choose it before I install another
app, every time.

My belief is that most people will take the path of least resistance, just
like I do. How confident are you that they won't?

------
WMCRUN
As an employee you typically don’t want your stock to skyrocket on the IPO.
Most that do plummet as early investors sell and the employees (who have a
lockup period preventing them from selling) watch their “gains” disappear. In
my opinion, it’s better to have an accurately priced stock that grows at a
healthy rate.

~~~
weka
A cart before the horse. Who gets the most profit? The people who finance the
project or the people who actually do the project? In a just world, would it
be 50/50? Seems skewed... without the builders, there would no buildings.

~~~
geezerjay
> In a just world, would it be 50/50?

What is your notion of "fair" and how do you go from there and arrive at that
value? I mean, if the people who financed the project didn't invested a penny
then the company would not have the means to get people to actually do the
project.

------
outside1234
I mean, let's be real here, is $42 really disappointing? Because from where I
sit, this company is going to be bankrupt in short order.

~~~
gojomo
I'll give you 10:1 odds Uber doesn't declare bankruptcy in the next 5 years.

~~~
warp_factor
probably not bankrupt, but they will basically become a small ride hailing
company with high prices. This will result in their stock falling
dramatically.

~~~
gojomo
Define 'dramatically', and by when you expect this will happen, and I'll offer
you odds as well!

~~~
warp_factor
In 5 years I expect the MarketCap to be around 10B$ max. If Self Driving cars
are a thing then even less than that.

their customer base will be richer//business people ready to pay higher
sustainable prices for rides.

~~~
peripitea
If you really believe this then you can probably make a healthy amount of
money buying put options.

~~~
marvin
5-year put options on Uber right now would probably cost more than the price
of the stock, which would put you at less than even odds. I don't think you
can get options yet, though.

A 5-year short.....maybe? Will be interesting to see what the short interest
and borrowing rate will be.

------
justinv
Morgan Stanley going to have to do a lot to stabilize the price over the
coming days...

On Uber's side, they sold at their $45 mark. However, seems this may have been
a down round vs their last private funding round ($74.1BN pre-money vs $76BN
last year).

~~~
rwmj
I'm confused by this comment. Is it the underwriter's job to intervene in the
market after the initial sale? I thought they simply guaranteed that all the
initial shares are sold.

~~~
justinv
Yes. The lead underwriter needs to stabilize the price post-IPO. When
$unicorn_company IPOs, the underwriter actually sells more shares than the IPO
company. If the price starts to drop below the originally listed price, the
underwriter steps in to purchase these shares back at the IPO price to
stabilize it.

It's generally an optics play - how bad would it look if you as a bank, who
wanted to continue to offer IPOs, listed a company and its stock price
plummeted below IPO on the first day - obviously you didn't do a great job at
valuing the company and building an adequate order book.

[https://www.investopedia.com/terms/s/stabilizingbid.asp](https://www.investopedia.com/terms/s/stabilizingbid.asp)

~~~
xenadu02
There's a limit to how much they can prop up the price though. If the market
really hates the stock they won't be able to save it.

~~~
justinv
Yep. MS has around 27MM shares out there for stabilization pot IPO. Once they
blow through that, it's the market's game.

~~~
rwmj
Wouldn't they buy shares to raise the price, indicating they need money rather
than shares?

~~~
b_tterc_p
Yes

------
wesammikhail
disappointing? jesus, its been an hour. Relax your freaking noodles. What´s
with everyone and instant gratification these days? The stock is still in
range discovery...

I myself am bearish but sitting this one out because I have no idea what to
make of it. One thing I know though, calling it disappointing 1 hour after
open during a tightning range is beyond irresponsible. It´s flat out stupid
and lacks any understanding of how markets work. The stock could literally pop
bull 5 mins from now, or not. Either way I wish people would stop with this
sensationalism.

~~~
dugluak
Sometimes I see no difference between these Market Gurus and Horoscope
readers. Just say some bullshit authoritatively and some people will believe.

~~~
rubyn00bie
There isn't any difference both are empirically absolute bullshit.

[https://en.wikipedia.org/wiki/Brownian_model_of_financial_ma...](https://en.wikipedia.org/wiki/Brownian_model_of_financial_markets)

~~~
IfOnlyYouKnew
That... doesn't quite work, logically?

Observing that there is no _predictable_ "signal" in stock price changes only
proves that whatever you're using to make predictions is unable to beat the
market (the "efficient market hypothesis").

Stock prices are very obviously not completely random, in that they tend
towards $0 when companies go bankrupt.

There is some randomness, or at least unpredictability, in stock prices. This
is called "volatility". But the model operates on the very small tick-to-tick
scale, not wether UBER is priced at $45 or $450.

------
chinesegoldfarm
legit/dumb question. Math does not add for me on the '$82.4B valuation', they
are selling 180 millon shares at $45 which is $8.1B what is the remaining
82.4b - 8.1b = 74.3b value come from????? it said: "Uber had raised $28.5
billion as a private company from no less than 166 different backers, with its
last valuation in the region of $75 billion. The $82.4 billion valuation that
it finally settled on for the IPO (selling 180 million shares at $45/share)"
So it means that when they raised the 28.5b privately it went to 75b
valuation???? please explain, thanks in advance...

~~~
tonfa
The market cap (valuation) is the value of one share times the number of
outstanding shares (those part of the IPO but also all the existing ones). $8B
is the amount of capital raised during the IPO.

~~~
chinesegoldfarm
but when you buy a share, you are part of only the 8B thats being raised with
the other 180 million shares, or do you have a small part of the whole 80~b
valuation?

~~~
hunter23
There are 80 billion dollars worth of shares that exist. However only 8
billion of those shares were released for the public markets. The remaining 72
billion dollars worth of shares are held outside of the public markets
(insiders, vcs, the company itself, etc.)

~~~
stokedmartin
Till such time those 72b shares do not become public, are these technically
still referred to as options? Also, for ex-uber employees who still own
shares, how does one restrict them to not sell those in the public market
assuming they are part of the 72b or will they only be part of the 8b?

~~~
hunter23
No, options are not the same as shares. Options are a contract that allows you
to buy or sell shares at a certain price.

The employees are part of the 72 billion. All employees (current or ex) have a
lock up period after the IPO where they are not allowed to sell.

------
onesmallcoin
Tech crunch's new close to home page button is a daring move I pressed it to
see what would happen and then decided not to read the article I came their to
read the news not to be sold more news.

------
smoyer
My primary disappointment with the Uber IPO is that I don't have a larger wad
of money to cover a short position.

~~~
kyleblarson
"To cover a short position" implies that you have a short position you are
buying to cover. You likely mean "to put on a short position"

~~~
dragontamer
> "to put on a short position"

Put is still a bad word because it has a connotation for options trading. (put
options vs call options).

Maybe "to bet on a short position" is the best phrasing? "Put", "Call", and
"Cover" all have precise meanings in the financial word. "Bet" is ambiguous
enough that its kinda clear in this case.

~~~
feanaro
To open a short position. Or simply "to short".

------
Yuval_Halevi
Uber and Lyft IPO is the worst thing that can happen to their users.

Uber will need to become more profitable so they will raise their prices and
the users will be the ones who suffer from this IPO

------
stjohnswarts
Overpriced. However I don't see them going belly up like all the naysayers
over in the corner with pitchforks who are declaring them doomed

------
Marazan
"Uber created the market for on demand transportation"

What the fuck is this?

It's a mini cab firm with an app. Mini cab firms existed before Uber.

------
jklinger410
How do you short stocks? Asking for a friend.

~~~
marcosdumay
If you have to ask, please refrain from acting and study a bit. Shorting is
risky business.

------
gigatexal
Meh. Bought shares in Zoom. They’re actually profitable.

Yes, yes, I know. This kind of thinking would have me not investing in an
Amazon back in the day because they weren't profitable... but they weren't
also losing almost as much as they were making in revenue either... and were
actually selling a tangible good to prove out a business plan of basically
world domination... so yeah I'm happy with my shares of Zoom.

------
truffle_pig
Uber is currently worth more than Stripe, Spotify and Dropbox combined. I'd
easily rather own those 3 outright than Uber. Wonder what the market knows
that I'm missing.

------
sudoaza
Not profitable while reaching the market ceiling and bad reception in lots of
places... no wonder here

------
cat199
probably one of the worst days to IPO given current china/us trade spat

~~~
Supermancho
I would think there's a lot more free cash floating as the sell offs continue.

~~~
warp_factor
This was used as a lame excuse.

Uber had actually something to win as you said because of all the free cash
floating around and the fact that Uber is completely out of China.

------
LeicaLatte
Congrats to everyone!

------
throwaway66666
Unprofitable companies are the only ones that really benefit from IPOs.

An IPO is basically a way for the company to raise money, but tis time
straight from the public. Usually when it gets harder and harder for them to
attract private investors. The IPO listing basically guarantees that they
won't take the public's billions and run.

Successful companies with perfect cash flows (think of Github, Valve, IKEA)
always try to remain private. Because they have nothing to gain by raising
more money. They can give their employees good bonuses and maintain control of
the company.

This is by design. In Silicon Valley we are obsessed with them because they
are the only meaningful exit for common employees (take the money and run
mentality). The rest of the world doesn't care much because they see them for
what they are.

Of course. Startup employees do not know they can sell their 'private' stock
already, today. However, they need permissions to do so from the company's
board (their answer will be NO. Here, saved you from asking. Or maybe they
will offer to buy back the stock with shitty terms), and can only sell them to
an accredited investor and not random people/public.

Many companies would be ran better if they remained private (think of
Facebook, which now has investor pressure to increase the price, which results
in careless decisions about data handling, privacy etc).

~~~
hunter23
This is incorrect. There are lots of cases where profitable companies want to
IPO. Specifically the public markets are where you go when you need to raise
money at significant levels. Nowadays this happens less often as their are
bigger and bigger private investors (so you can raise billions in private
markets). However there is still a point at which you may need to go public
for fundraising.

You are making a mistaken assumption that only unprofitable companies need to
fundraise, there are lots of profitable companies that want to raise capital
to fund future growth (and their current cash flows aren’t enough).

Also I am very surprised that you named Github as a well run private company.
As far I know, they were definitely not profitable (their spend was crazy)
which is part of the reason the board took the acquisition offer from
Microsoft. I really don’t think they are a good example of a well run private
company.

You are correct that only companies that want capital IPO but that is by
definition as an IPO is a capital raise. I believe that direct listing is an
exception to this.

~~~
throwaway66666
You are correct. There are many cases where fundraising for successful
companies is needed. From liquidity, to gathering funds to fuel new ventures.
Acquiring competitors, etc.

My assumption was that troubled ones also need it. So we should not be
surprised that see so many controversial IPO listings recently.

------
NN88
how would the average employee at uber HQ who was there for 4-5 years before
today?

------
jerkstate
it's all a matter of perspective, I think an $80 billion market cap for a
company that loses billions of dollars every year with no end in sight is not
that disappointing at all for those who can sell today

~~~
kgwgk
Those who can sell today did buy it for a higher price yesterday, I think.

------
notTyler
Reminder that Facebook opened lower than this and was lower for years before
they started growing. Granted, FB can, you know, make money.

~~~
asdff
> Granted, FB can, you know, make money

And there is the rub. Uber and lyft both loose money on every ride. Their
whole strategy was to dominate sweeping markeshare by subsidizing rides, then
cutting costs significantly with an autonomous network of driverless cars.
AFAIK uber already failed in the second half, so there really is no plan right
now with what to do with these massive expensive networks of drivers that both
companies are now beholden to, other than shovel more money into the furnace
and hope the lights stay on long enough for driverless cars to appear through
a competitor who'd be willing to let uber use their tech. Even then I don't
see margins being anything but razor thin.

I'd be polishing my resume if I worked at either of these companies.

