The much-anticipated initial public offering (IPO) for Uber failed to live up to the hype. Being priced at the lower end of its potential range did not help, as the stock plunged more than 7 percent in opening trading.
Uber’s IPO had been hailed as the most exciting since Facebook. However, rather than following the social networking giant, Uber followed its competitor Lyft. Lyft also ended trading down 6.9 percent, leaving many questioning whether any profits were possible in the industry. Jordan Stuart, portfolio manager at Federated Kaufmann, said:
“If a venture capital investor wants to burn cash they can do that as long as they want, but once you get to the public markets you have to show profitability or a path to it.”
For its part, Uber has suggested that the stock price is simply a bump in the road. Uber’s founder and CEO was quick to point out that the race for a strong stock price is a marathon, rather than a sprint.
“My reaction (to the share price) is if we build and build well, shareholders will be rewarded. We’re certainly not measuring our success over a day, it really is over the years.”
Others, though, were less supportive of the ride-sharing application. The company has been hurt by a number of scandals and corporate losses. According to Robert Johnson, professor of finance at Heider College of Business, Creighton University in Omaha,
“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?”