NEW YORK Ė Uber Technologies Inc.ís stock dropped sharply on Monday, marking another setback for the highest-profile company to go public in years and threatening to cast a chill over what had been a red-hot IPO market.
Uberís stock slid $4.47, or 11 percent, to $37.10 on its second day as a public company, placing it 18 percent below the ride-hailing giantís initial-public-offering price of $45. That is after Uberís valuation expectations were dialed back in recent weeks and the company priced its IPO conservatively, in its view.
The slide in Uber shares marks the second big blemish this year for the IPO market, as rival Lyft Inc. went public in late March in another hotly anticipated offering and quickly tanked. It shares are now 33 percent below the initial price of $72 a share.
In an email to Uberís employees seen by The Wall Street Journal, Chief Executive Dara Khosrowshahi wrote: ďObviously our stock did not trade as well as we had hoped post-IPO... I expect some tough public market times over the coming months.Ē
This year is expected to be a banner one for IPOs, with several notable companies hitting the public markets. Uber, Lyft, Zoom Video Communications Inc. and Pinterest Inc. have already gone public, and Slack Technologies Inc. and WeWork Cos. are expected to land later this year.
Shares of those IPOs slid on Monday. Lyft declined 5.8 percent, Zoom slid 8.9 percent and Pinterest fell 8.3 percent. Still, Pinterest is up 40 percent from its IPO price and Zoom is trading at roughly double its offering price.
Beyond investors who bought in at Uberís IPO price and have been burned, many private investors who have pumped money into Uber over the past several years are now underwater.
Uber is trading about 28 percent below its Series G stock price of $48.77, in which the company raised more than $8 billion from December 2015 through October 2018.
Catherine McCarthy, a technology analyst at Allianz Global Investors, said Allianz had owned Uber shares before the IPO but was no longer invested.
ďOur confidence was really shaken by Lyft,Ē McCarthy said. ďTo see Lyft continue to fall hasnít helped.Ē
McCarthy said she is also concerned that Wall Street isnít expecting Uber to report net income for at least several years, and that is if the company executes on its strategy. ďThatís a long time,Ē she said.
Broader markets have been rocky as investors grapple with a spat over trade between the United States and China. When Uber went public on Friday, markets were selling off sharply, although the companyís shares took a dive into the close while markets rallied.
On Monday, stocks were much lower, with the S&P 500 falling 2.4 percent. On both days, tech companies bore the brunt of investorsí punishment.
The drop in Uberís valuation weighed on shares of its biggest backer.
SoftBank Group Corp.ís US-traded stock fell an additional 5.5 percent on Monday after closing Friday 12 percent lower. SoftBank bought into Uber in early 2018, writing a $7.7 billion check for a roughly 15 percent stake.
The tepid investor response reflects muted expectations that Uber will be ďan overnight success story,Ē Wedbush Securities analysts said in a note.
They said investors will need time to digest how Uber fares with competitors, its strategic vision around Uber Eats and Freight, and its autonomous ambitions.
ďWe expect Uber to be operating at a loss for at least the next few years, but believe investors should be more patient with Uberís investments as its leadership position will help lead to better long-term competitive positioning for this tech juggernaut,Ē the analysts said.
A lack of profitability is one hurdle in a series that threaten Uberís bid to become the destination for all forms of transportation. An onslaught of competition from ride-hailing rivals and food-delivery startups helped inflate Uberís loss to more than $3.7 billion in the 12 months ended in March. That is by far the largest loss by a US startup in the year before an IPO, according to S&P Global Market Intelligence.
Uberís revenue growth has also flatlined, a problem for a company that pitched itself as one defined by growth. While revenue was on a rapid march upward in 2017, growing well over 10 percent every three months, it has barely budged in the past few quarters. Its revenue between last yearís third and fourth quarters grew by just 1 percent and an additional 3 percent in this yearís first three months, to about $3.1 billion.
Uber has attributed its stalling growth to aggressive competition around the globe, with cash-infused rivals such as Didi Chuxing Technology Co. pushing deals to woo riders and drivers in Latin America, for example.
Uber has had to fight back with costly discounts to riders and subsidies to drivers, and it has lost market share in some major markets.
Its Uber Eats food-delivery business, touted by executives as a shining star, has lost some ground in the US, India and elsewhere.
During the roadshow to pitch the IPO to potential investors, Khosrowshahi often compared Uberís business model to that of Amazon.com Inc. In his letter to employees on Monday, he noted that both Amazon and Facebook Inc.ís stocks struggled in their early days as public companies. ďAnd look at how they have delivered since. Our road will be the same.Ē