As Morgan Stanley's wealth management clients grumble about being saddled with allotments in the Uber IPO that lost value immediately after the company's market debut on Friday, the ride-hailing giant was on track to open lower for a second day on Monday after an embarrassing 7% drop on Friday, making it more difficult for Uber's underwriters to blame the drop on difficult market conditions.
Uber shares dropped below $40 in pre-market trading on Monday, more than $5 below their IPO price of $45 (which was already near the low end of its revised price range). Though the main US benchmarks looked set to open lower on Monday, Uber still closed deep in the red on Friday despite a late-day rebound in the broader market.
As Bloomberg adds, the share slump reflects investor skepticism about the size of the ride-hailing market, Uber’s ability to execute on food and package delivery and its push into autonomous vehicles, according to Ygal Arounian of Wedbush Securities. The IPO also comes as investors shy away from riskier assets given U.S.-China trade tensions, said the analyst, who has an outperform rating on Uber and sees the stock reaching $65 in the next year.
“Uber’s highly anticipated IPO coming out of the gates on Friday was clearly not a ‘storybook start’,” Arounian wrote in a note. Uber is a “prove me situation and thus not going to be an overnight success story.”
Considering that anyone who has bought Uber shares since its IPO is now losing money, Arounian will have to engage in even wilder mental acrobatics to justify his $65 price target.