NEW YORK ¨C Uber¡¯s bruised investors have had the weekend to prep for what looks like a rough Monday for markets, partly because the escalation of President Donald Trump¡¯s tariff spat with China is set to hammer sentiment.
Shares of Uber Technologies Inc. resume trading Monday 7.6 percent below their offering price after Friday¡¯s flop. Among the factors that buffeted the biggest IPO of the year: a broad stock market selloff in the morning and a weak earnings report posted by Uber¡¯s primary rival, Lyft Inc.
Uber opened at $42, or 6.7 percent below its $45 IPO price. Shortly after, it slid to $41.06. While the company briefly reclaimed almost all its losses by early afternoon, the comeback proved short-lived.
¡°While the trade war has caused overall stock market volatility, we believe that the poor trading in Lyft was the major factor impacting Uber,¡± said Kathleen Smith, co-founder of Renaissance Capital and manager of the IPO exchange-traded fund. ¡°Investors are applying the valuation multiples of Lyft to Uber. And as the Lyft stock dropped, so did Uber.¡±
Over the last three trading days, Lyft retreated 13.9 percent to an all-time low. Meanwhile, the Renaissance IPO ETF added 0.5 percent, outpacing the S&P 500. So while Uber and Lyft are going through some ¡°tough price discovery,¡± and may continue to do so in the coming days, the rest of the IPO market appears to be healthy, Smith said.
In the first hour of the ride-sharing company¡¯s IPO, retail investors at TD Ameritrade executed 1.8-times more trades than in Lyft¡¯s first 2.5 hours, according to TD Ameritrade¡¯s Alyson Nikulicz. Uber had made up 10 percent of Friday¡¯s equity trades as of 1:28 p.m. in New York at TD Ameritrade.
Before Uber¡¯s debut, out of a total of 60 companies, only four IPOs of a billion dollars or more had a decline of at least 5 percent since the start of the decade. Only seven ended the first day of trading in the red.
¡°We believe this is kind of a near-term speed bump, we don¡¯t view this as a Lyft 2.0,¡± Dan Ives, Wedbush Securities managing director, said on Bloomberg TV. ¡°This continues to be a ¡®show me¡¯ story.¡±
For now, the story is set to be one of volatility as traders dump equities and other riskier assets. The weekend¡¯s back-and-forth between Trump and China suggests U.S. Treasuries and currencies such as the yen and Swiss franc will be seeing a lot of action on Monday.
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