Uber drops $12bn in value

Uber shares fell as much as 10%, doubling losses since its poorly received Wall Street debut last week, and raising more questions about investors’ faith in its ability to make profits.

The move, which came in a wide-ranging sell-off on global financial markets spurred by more US-China trade tensions, led to shares trading lower at $37.17, valuing the company at about $12bn (€10.7bn) less than Friday’s debut price of $45.

Before going public, Uber lowered its valuation expectations twice in two months to address investor concerns over the company’s mounting losses, and priced its initial public offering at the low end of the targeted range.

Rival Lyft, which went public at $72 a share on March 29, has lost a third of its market value since and was down 6% at $47.95 in early trading. 

Both IPOs took place against a backdrop of renewed concerns on Wall Street over global growth due to the trade tensions, although US stock markets are all currently far higher than they were at the end of last year.

“The current narrative relating to the social economic nature of the ride-hailing segment is negatively having an impact on the shares of both Uber and Lyft,” said Zephirin Group analyst Lenny Zephirin.

While both companies are trying to find ways to lower driver costs to become profitable, drivers went on a protest in several US cities earlier this month demanding job security, livable incomes and a cap on the amount ride-hailing companies can collect from fares.

Investors have struggled to figure out how much Uber and Lyft are worth, given both companies have not estimated a timeline for turning a profit.

Lyft posted a $1.1bn quarterly loss last week and forecast losses would peak this year as it controlled expenses and got more revenue from each customer.

Uber has warned in a regulatory filing that it may never be profitable.

Wedbush analyst Ygal Arounian said investors need to be patient as Uber reaches full monetisation potential with its ride-sharing platform and a broader growth engine with Uber Eats, Uber Freight, and autonomous driving initiatives.

“While it will take time for the stock to settle and Uber must execute flawlessly over the coming 12 to 18 months, we believe a $100bn-plus market cap is warranted,” said Mr Arounian.

Zephirin and Wedbush have top ratings on Uber stock.

Reuters

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