NEW YORK – 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.