Uber shares traded at a new record low on Wednesday as early investors in the 10-year-old ride-hailing company gained the ability to cash out following the end of a lock-up period, six months after its stock market flotation.
At its worst, the stock fell 9 per cent to $25.58, putting it 43 per cent below the price of its initial public offering in May. Later, it traded down 4 per cent on the day.
Analysts estimated that close to 90 per cent of Uber’s shares could have become available for trading on Wednesday. That has raised concerns that its early venture capital backers will look to sell their stakes and depress the stock price.
The plant-based food company Beyond Meat fell 22 per cent last month on the day its lock-up expired after early investors such as Kleiner Perkins signalled they would sell shares.
But many private investors in Uber remained underwater on their holdings compared with the prices they paid in private markets, forcing a difficult decision: sell and cut losses or wait for a reversal in the stock.
“Uber is a poster child for a company that was brought to market at too rich of a valuation, with too much hope baked into the multiple,” said Richard Kramer, managing partner at Arete Research.
Uber’s largest shareholder, Japan’s SoftBank Group, was sitting on more than $800m in paper losses this week after buying a 13 per cent stake in the company through a private funding and tender offers. SoftBank said on Wednesday that a decline in the fair value of its Uber stake had contributed to an operating loss in the third quarter.
Other private backers who invested beginning in 2015 could also be facing paper losses, according to regulatory filings. Saudi Arabia’s Public Investment Fund’s $3.5bn investment in 2016 included preferred shares priced at $49, the filings showed.
Uber’s persistent losses have tested the patience of public market investors. Chief executive Dara Khosrowshahi said this week that the company would begin making a profit in the 2021 calendar year, after it reported widening losses in the Uber Eats food delivery unit and other fast-growing new businesses.
The company has also come under pressure from short-sellers, which have placed bets against the company totalling almost $1.6bn, or almost 8 per cent of the company’s shares, according to data from S3 Partners.
Some early Uber investors such as venture capital firm Benchmark Capital already gained the ability to sell some shares during the tender offer led by SoftBank and Dragoneer Investment Group in 2018.
Shawn Carolan, a partner at Menlo Ventures, said on Tuesday that the firm would continue holding its Uber shares following the lock-up expiration.
He wrote on Twitter: “Eight years after our initial investment, we remain inspired by [Mr Khosrowshahi], the entire Uber team, and their mission to ignite opportunity by setting the world in motion.”
Patrick McGee contributed reporting in San Francisco