The lockup period of 180 days finally ended yesterday for Uber, and its shares fell to an all-time low. What does a lockup mean for companies? It means that investors and employees are free to sell their shares. This came shortly after Uber made a report about their report that it is losing rather than gaining. This gave transparency about different breakouts. This report failed to provide reassurance to its investors. Hence, the significant loss.
Uber got the lowest share when the market opened on Wednesday, $25.58. On Tuesday, it had a $27.97. Its IPO price is $45, which made it 40% lower than its original cost. Dan Ives, an analyst from Wedbush Securities, estimates a considerable risk for Uber, projecting around 25% sales of stocks. This has been one of the darkest days for Uber, but it should also start to bounce back after all of these.
One hundred thirty million shares were traded on Wednesday compared to their 11 million typical everyday days.
This is still not so clear as to how many shares were sold for the first time. The stocks were already down this week.
Chief Executive Dara Khosrowshashi said that Uber would expect to make a profit in 2021. This timeline gave optimism to investors. This will be based on adjustments that do not include interests, depreciation, and amortization.
Uber opened to the public in May this year and has a hard time getting investors in. Uber Eats is also one factor that concerns the markets. With the company’s losses, there had been some recon structuring done already in its operation. There were two parts of job layoffs since the IPO. This lockup has yet to prove another protest from the drivers of Uber.
Lyft, a competitor of Uber, have built their businesses through their drivers. These two companies consider these drivers as independent contractors rather than employees. This means that a contractor won’t have a minimum wage, no unemployment insurance, no paid sick leave, no overtime, and the likes. The only thing that these companies could control is paying the drivers.
Protests being held are for emphasizing the difference between investors gaining millions or billions. In contrast, drivers who work all day would get even lesser than the minimum wage as they watch their cars depreciate overtime for every distance they drive. The protesters would like the policymakers to listen to them. Make way for them to unionize.
An analyst from RBC Capital, Mark Mahaney, said that long term investors should still believe in Uber. There has been a massive increase in the market for a ride-sharing business. The lockup doesn’t affect Uber’s fundamentals, and it could even be profitable in the long-term run.
Companies that have positive stock performance can also be struggling following an IPO. Many of them rose after several months, therefore, investors shouldn’t be worried about the doom of Uber. Rest assured that there will be some post IPO gains to follow in the future.