What Uber's IPO tells about investors state of mind

Summary

Nicole and Peter Spiegel report from the New York Stock Exchange on Uber's IPO, which opened at $42, below its $45 offering price, amidst a down market. They discuss investor sentiment turning cautious, focusing on companies' profitability paths. The trend of tech companies like Lyft, Pinterest, and Uber going public now is partially due to the late-stage bull market and upcoming 2020 presidential election. Despite Uber's disappointing debut, it remains uncertain if this will affect future IPOs, though companies may adopt a more conservative approach to meet investor expectations.

Takeaways

• 📉 Uber's IPO opened at $42, below the expected price of $45, signaling a rough start.
• 📊 Market makers attributed the IPO's lower performance to a down market and weak sentiment throughout the week.
• 💡 There's a shift in investor sentiment toward ride-hailing apps like Uber and Lyft, with less enthusiasm than before.
• 🚗 Investors are still excited about tech disruptors, but there's no overwhelming euphoria compared to previous tech IPOs.
• 💰 Investors are now more focused on companies having a clear pathway to profitability, even if they are not yet profitable.
• 📈 Lyft and Uber are both unprofitable, but the market is willing to support them if there's a credible trajectory toward profitability.
• 🕰️ This wave of tech IPOs, including Uber, Lyft, Pinterest, and Slack, marks the biggest since Facebook's IPO in 2012.
• 🏛️ Many of these tech companies stayed private longer due to the increased availability of private funding.
• 📅 Some companies may be rushing to go public due to concerns about the end of a decade-long bull market and upcoming political uncertainties in 2020.
• ❓ Despite Uber's rough opening, it's too early to say whether this will impact future IPO decisions, though companies may be more conservative moving forward.

Q & A

What was the opening price for Uber's IPO compared to its initial offering?

Uber's IPO opened at $42, which was lower than the initial offering price of $45.

What reasons did market makers give for Uber’s IPO starting below the offering price?

Market makers suggested that the overall market was down for the week, and the negative market conditions contributed to Uber's lower opening price.

How did Lyft's previous IPO affect market sentiment around Uber's IPO?

Lyft's earlier IPO, which also faced challenges, appeared to influence market sentiment, turning some investors cautious about ride-hailing companies like Uber.

What is the general investor sentiment towards tech companies going public at this time?

Investors are excited about tech companies disrupting various industries, but there is not the same level of euphoria seen with earlier tech IPOs. Investors are now more focused on companies having a clear path to profitability.

What are investors currently looking for in tech IPOs like Uber and Lyft?

Investors are looking for companies to show a clear pathway to profitability, even if they are not immediately profitable.

How does Uber's IPO compare to previous large tech IPOs?

Uber’s IPO was the largest tech IPO in seven years, with Facebook being the previous largest one in 2012.

Why are many tech companies going public now, according to the analysis in the transcript?

There are a few reasons, including the long bull market nearing its end, and the anticipation of a contentious 2020 presidential election, which might bring uncertainty to the market.

What change in behavior are tech companies showing in their approach to IPOs compared to the past?

Tech companies have stayed private much longer than before, growing significantly through private funding before going public.

What effect could Uber’s IPO performance have on other tech companies considering going public?

Although it's too early to tell, Uber's lower-than-expected IPO performance might lead future tech companies to be more conservative in their pricing and cautious about market sentiment.

How did Uber adjust its strategy following Lyft’s IPO performance?

After seeing Lyft’s struggles, Uber chose to be more conservative with their IPO and did not push for the highest possible price, aiming for more sustainable investor confidence.