Finance

Uber IPO Underwhelming Everybody, And It's The Best News We've Had In Weeks

The market is teaching Uber a very hard lesson about how dynamic pricing really works.

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Even we saw this coming. And now it’s here:

Uber began trading on the New York Stock Exchange Friday at $42 per share.

Uber priced its shares at $45 Thursday night, toward the low end of its target range of $44 to $50 per share. That gave Uber a valuation of $75.46 billion at its IPO on a non-diluted basis, still well below the $120 billion it was reportedly seeking when news first broke it was preparing to go public.

When your financial picture is only viable when viewed through the most rose-colored of glasses, it’s not the best idea to enter the public market the very same week that your closest competitor had a nightmarish first-ever earnings report and the same morning that the president passive-aggressively tweets out that he’s essentially started a trade war with China.

And yet, Uber hath done it.

We all went to bed with the notion that Uber had priced its IPO at the low end of its range so that it could pop up from $45 a share and not down from $50. Then we all spent this morning watching the market decide that even the low end was a bit high for a company that doesn’t seem interested in making a profit. And watching the IPO price drop $3 in a matter of minutes made sense considering that Uber is looking to raise capital at the end of a week that saw the S&P drop more than 70 points.

The whole thing feels terrifyingly logical.

As bad as this sucks for Uber, we can’t help but see this as a positive development.  We’ve been emotionally reduced to viewing the market through a prism of a nurse working a psych ward. Trump’s objectively meaningless tweets on China have been treated like actual data to such a degree that they have become actual data. No piece of negative macro data can’t be overcome by a handful of okay earning reports and the highlight of this month has been the IPO of fake meat. Watching the market take something of a quasi-pass on Uber gives us a glimmer of hope that logic is not entirely dead in finance.

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We fully expect Uber to drop into a range where algorithms are waiting to pretend that it’s undervalued and robots start buying. Once that happens (we’re guessing it will be around $39 a share), Uber will indeed pop back into a nonsense range. But at least we’re getting some healthy cynicism up front, one that provides Uber with an object lesson in how actual dynamic pricing really works.

Uber is taking the punishment of a market that has finally found its sanity, and all it took was a trade war between the world’s two largest economies.

Enjoy the weekend!

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