The Uber stock market debut has been shaky. What’s next?
The Uber stock market situation seems to be getting worse by the day. Will the embattled ride-hailing app be able to bounce back in 2020?
The Uber stock market launch was meant to be a defining moment for one of the world’s best-known unicorns. From Buenos Aires to Brisbane, Paris to Philadelphia, the ride-hailing app had become a beloved service in hundreds of cities worldwide. Coupled with its side businesses, including driverless cars and food deliveries, the company’s vision was simple: “To be the operating system for your everyday life.”
In the run-up to Uber’s initial public offering, the buzz surrounding Uber stock was insatiable. The biggest banks on Wall Street were estimating that the 10-year-old company could generate a valuation of $120bn (£91bn) – considerably more than the $104bn (£66bn) Facebook was worth at the time of its flotation in 2012.
Then, in May 2019, the rhetoric met reality. In the end, the Uber IPO managed to raise $8.1bn (£6.3bn) – selling 180 million shares at a price of $45 apiece. Although this comfortably placed the tech company in the prestigious rankings of the 10 biggest IPOs of all time, this meant Uber was valued at just $82.2bn when fully diluted – two-thirds less than what some pundits had been predicting.
Things got worse… and quickly. In the first full day of trading, the Uber Technologies share price slumped from $45 to $41.57, a decline of almost 8 per cent. On the same day it made history for being one of the biggest IPOs ever, it also entered the record books for having one of the worst performances on a stock market debut.
Uber has been struggling to keep its head above water ever since. It took almost a month for the company to return to its IPO price – and even then, this level was short-lived. The tech giant’s high point came on 28 June when shares ended the day at $46.38, and in the months that followed, their price has been in continual decline. Here, we delve deeper into Uber company history and its past controversies, examine the threats that lie ahead, and explore market predictions for 2020.
A snowy night in Paris
As the story goes, the vision for Uber was born when Garrett Camp and Travis Kalanick were desperately trying to find a taxi on a bitterly cold, snowy night in Paris back in late 2008. They weren’t the first to pounce on the idea of a ride-hailing service, but both were frustrated that existing offerings were difficult to use. Initially, they wanted their app to focus on the high end of the market, delivering luxury rides to America’s professionals. Although the option of hiring a “black car” remains to this day, the start-up was quick to pivot to the mainstream market.
The first trip would be requested in San Francisco in the summer of 2010, and a rapid expansion followed. Uber would return to Paris – this time as a fully fledged, operational idea – three winters later. Barely four years into its existence, Uber was available in 100 cities. This aggressive rollout meant the firm was haemorrhaging cash, a theme that continues to this day. Fast forward to April 2019, the month before the IPO, when Uber made the startling admission in its S-1 filing that it may never achieve profitability.
In its early life, Uber was quickly becoming a household name in a constantly increasing number of countries worldwide, but it was creating powerful enemies and racking up controversies along the way too. A long-running issue has been the status of the hundreds of thousands of Uber drivers who serve its customers. While the start-up has long maintained they are independent contractors benefiting from the flexibility of the “gig economy”, drivers in countries around the world have taken legal action to demand they are treated as employees who are entitled to things like a minimum wage and sick pay.
Come 2014, Uber was fighting allegations on multiple fronts. Chief executive Travis Kalanick sustained a backlash when he called the company “Boob-er” in a magazine interview while describing how the app was popular with women. The company’s employees were accused of ordering and cancelling rides on rival services in an attempt to poach frustrated drivers. Claims emerged that executives also had access to “God View” that allowed them to track the locations of unsuspecting users. By 2017, Uber was fighting scandals focused on allegations of a misogynistic company culture, and a damning video that showed Kalanick arguing with a driver. This is just the tip of the iceberg when it comes to Uber’s PR disasters, and we’d run out of space if we were to mention them all.
The Uber Technologies share price now
Uber stock market performance has continued to disappoint, hitting lows of $25.58 in mid-November. But the big bombshell came later in the month, when the Uber London licence was withdrawn by regulators. The company had been given 15 months to make amends for safety failings and corporate governance concerns, with revelations that the company had a “Greyball” app to evade surveillance by local authorities proving highly detrimental to its credibility. But, on the day the licence extension expired, Transport for London ruled Uber was still not a “fit and proper” operator – citing statistics that 14,000 fraudulent trips had taken place where unauthorised drivers were giving lifts to passengers.
The company can continue to operate while it goes through the appeal process in the courts. Already, ride-hailing rivals are getting the infrastructure in place to seize Uber’s customers if it loses. The formal revocation of the licence would be nothing short of calamitous for the company given how the UK’s capital is one of five cities that contributes to 25 per cent of all bookings.
In terms of predictions for the Uber Technologies share price in 2020, some analysts are turning bullish. The investment banking firm Stifel says the stock is turning a corner with signs of improvement in the fundamentals. Analysts at SunTrust are also expecting great things from the ride-hailing app in 2020 and suggest that share prices could rise 90 per cent from their current levels.
Others are much more cautious. At the start of November, company executives used an earnings call to suggest they were aiming to achieve profitability for the 2021 calendar year, but provided little detail on how this would be achieved. Sceptical investors sent the stock plunging by almost 10 per cent the following day. And all of this drama came before the Uber London licence fiasco, with some analysts reserving judgment on 2020 predictions and whether ambitious financial targets can be met until there is greater clarity on its legal standing in the British capital.
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