The Biggest IPO of 2019
The biggest IPO of 2019 went live last Friday (10th of May), it also happened to be one of the most anticipated IPOs in history. I wanted to share my thoughts on it last week and weigh in on whether it was a good buy or not, but got busy. So now, let’s reflect on it post-IPO. First of all, what’s an IPO?
IPO stands for initial public offering. It’s basically when a private company goes public enabling people like you and me to invest in it and publicly trade its shares. This means you can invest and be a part owner of Uber by buying its shares on the NYSE.
It’s also the big pay day that all start-up founders and early investors dream about, as it is the day when they can “cash in” big on their early investments. The Crypto-currency equivalent of an IPO is the ICO (Initial Coin Offering), a concept which took of in 2017 with a lot of start-ups raising capital by offering coins to investors before listing on exchanges like Huobi, Binance etc
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What did I miss?
UBER IPO-ed on Friday the 10th of May. I personally didn’t invest in UBER and won’t be looking to buy Uber Stock for now. My investment mentor advised against it because the fundamentals don’t add up despite the hype.
The fact is that despite it becoming a globally recognizable company, Uber is not yet profitable and hasn’t been for a while. Last year the taxi-hailing company lost $3.03bn from operations, the year before that, a whooping $4bn and another $3bn in 2016! (Source: Uber SEC filing)!
At a proposed price of $45 per share, UBER entered the market valued at about $84.5 billion valuation. Equating the value of Uber to the combined market cap of Ford Motor company, General Motors and FIat Chrysler. Almost $100bn for a company with not much value to show except for an interesting story of ‘market disruption’.
The Biggest First-Day Dollar Loss In US History
Prices tanked by 7.6% on its first day of trading and fell another 11% the next trading day with prices falling as low as $36.08 and closing at $37.25 a share taking its value to the lowest it’s ever been valued since 2015. it was also reported to be the biggest first-day dollar loss in US IPO history!
As with all things money, the numbers don’t lie. Uber’s pre and post-IPO numbers tell an interesting tale. Another highly anticipated IPO of 2019, LYFT also had similar results and with shares currently trading at about $50, LYFT stock is down some 42% from it’s IPO price.
What We Can Learn From This IPO
There’s a lot to learn from these two IPOs, for young African entrepreneurs and investors we’ve got to start thinking in terms of the big picture. We’ve got to think in terms of long-term returns as opposed to small short-term rewards. We’ve got to fully understand the fundamentals of capitalism: the importance of turning ideas into cash-flow leveraging capital.
Even though UBER’s shares are down, early investors are smiling and have probably booked some profits for themselves. For a company which has logged billion dollar losses for 3 consecutive years, the founders and the marketing team have done a pretty great job of hyping up the IPO to able to open with the valuation they opened with!
Would love to hear your thoughts on this post or answer any questions you may have – if you have any. Feel free to drop your comment in the comment section below or connect with me on FB, Tw or IG @theittai