Uber stock drops in rocky debut

IMAGE DISTRIBUTED FOR UCLA ANDERSON- Ursula Burns chairman and CEO Xerox Corporation recipient of the 2015 John Wooden Global Leadership Award speaks at the Eighth Annual John Wooden Global Leadership Award Dinner at the Beverly Wilshire hotel on Tue

Matt Kennedy, a senior IPO market strategist at Renaissance Capital, says that over the past five years, just 10 per cent of US technology companies backed by venture capital finished their first day of trading below their IPO price. Nevertheless, the offering values Uber at $82.4 billion - impressive, no doubt, but less than the $100 billion forecast Uber floated to investors this year and far below the $120 billion that some bankers anticipated last year.

Uber's debut and its coming days of trading will be closely watched by other prominent startups looking to tap into public money, including flexible office space firm WeWork and workplace messaging app-owner Slack Technologies Inc.

The jitters about an intensifying USA trade war with China also have roiled the stock market this week.

The stock earlier dropped as much as 8.8% to $41.06 as USA equities extended losses, with the S&P 500 poised for its biggest weekly drop this year.

Uber's valuation is nearly a third less than the valuation of up to US$120 billion that its investment bankers predicted past year.

Uber is due to begin trading on the New York Stock Exchange on Friday under the symbol "UBER", the most anticipated United States debut since Facebook seven years ago. After submitting its confidential filing in December, Uber - along with Lyft Inc and a host of other hopefuls - was left sitting on the sidelines while U.S. stocks enjoyed the best start to a year in at least a decade.

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Uber's executives and advisers settled on a final IPO price after spending the past couple of weeks pitching to potential investors at roadshow events in cities including New York, London and San Francisco.

Despite Uber moderating its IPO expectations, some still consider the stock overpriced. Robert Johnson, professor of finance at Heider College of Business, Creighton University in Omaha, Nebraska said.

In its latest attempt to make amends, Uber disclosed Thursday that it reached a settlement with tens of thousands of drivers who alleged they had been improperly classified as contractors. But, yet again, here comes California math once more.

"We are willing to give quite a bit of rope and leeway on current profitability if you can show how you're going to get there", said Jordan Stuart, a portfolio manager at Federated Kaufmann who often purchases companies' shares during an IPO.

Uber has been working with Morgan Stanley to lead its IPO plans, alongside Goldman Sachs Group Inc. - once the company's go-to bank - and Bank of America Corp. It lost $3.04 billion last year on an operating basis on revenue of $11.3 billion, bringing total operating losses over the past three years to more than $10 billion, according to filings.

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