What Uber's IPO tells us about investors' state of mind
US managing editor Peter Spiegel and markets reporter Nicole Bullock discuss why the US ride-hailing company's stock traded below the $45 IPO price at the New York Stock Exchange
Produced, filmed and edited by Gregory Bobillot
Nicole and I just spent two hours on the floor of the New York Stock Exchange, right behind us, covering the Uber IPO. Nicole, it opened up at 42. The IPO, of course, was for 45, not an auspicious start for Uber.
Now, we were talking to some of the market makers inside and they were arguing: look, it's been in a down market all week, it was a bad market today. So they said they're not necessarily upset with the outcome. But I've got to tell you this comes a couple months after Lyft. There seems to be sentiment turning against some of these ride-hailing apps. What's your takeaway from today's action?
People are excited about this latest round of tech visionaries disrupting everything from the way we communicate, the way we get around, the way we travel around the world. They're excited about it, but not euphoric. So that's sort of the nuance here compared to some previous generations of tech companies that have gone public to just absolute insane amount of euphoria.
Another thing that's going on now is investors are really looking for companies to have a pathway to profitability. They don't necessarily have to be profitable now. In fact, Lyft is not profitable. Uber is not profitable. But investors need to get comfortable around the story, around the trajectory to profitability.
The pathway. And it's interesting. This was the largest tech IPO, I guess, in seven years, right? Facebook was the biggest one, in 2012. We've had a whole spate of them now. We've had Lyft, as you said, Pinterest. We have Slack coming up.
Why do we think that everyone's now suddenly coming to market now? Is there anything that tells us about the froth in the market or sentiment in the market? Why do we think everything is happening now?
This generation of tech companies out of Silicon Valley has stayed private much longer than we've seen historically. So they've been able to grow to these very, very large sizes through private funding. And that's because the private market, the pool of money, available for private investing is just much larger than it has been in the past.
So there's a couple of different theories about why now, which is the big question. One is that we are in the very late stages of a decade-long bull run. I don't want to say time's running out, but I think people are aware that we are getting to the late stages of it.
Another thing that sources have been telling us is next year, 2020, is a potentially contentious presidential election. So perhaps companies are thinking - and their bankers might be advising them - let's get this done and dusted before we have this very high level of uncertainty that could potentially come into the market.
All right. Last question, just, again, some colour from the floor - and I know it's day one so it's hard to draw any conclusions - but as we were standing there, we saw the guidance go from 46 to 48 and then lower, and then lower, and then lower. And you and I sort of turned to each other and said, gosh. You could feel the air just seeping out of the room. Does the fact that Uber is opening lower than the IPO price following the Lyft sort of going haywire in their IPO, do you think that's going to affect decision-making going forward, whether some of these IPOs, these tech companies, that were thinking about going public may now stop or is it too early to call that?
I think it's too early to call because we'll have to see what happens over the next couple of months. It is day one. It was a down day. But, certainly, you do not want to open below your offering price.
It's more about a good signal of what the investor mindset is that the companies that come now, it may not change anybody's decision to come. But after Lyft, the word around Uber was that they were going to be much more conservative. They were not going to push it to the bitter limit and take as much as they could in the IPO.
And so I think that's what you'll see going forward is that companies will be mindful that investors are being very discerning. And they have to bake that into their prices.
Thank you, Nicole. To read Nicole's coverage of the IPO surge over the last few months, please go to ft.com. I'm Peter Spiegel at the New York Stock Exchange.