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I read a funny article about Slack’s (NYSE:WORK) direct listing recently that ridiculed the IPOs of both Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT). I won’t get into the details. Suffice to say, the writer wasn’t pulling any punches when it came to Uber stock.
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The author, Bryan Menegus, wrote an entire article in May about just how bad Uber stock is. Entitled Congratulations to Uber, the Worst Performing IPO in U.S. Stock Market History, Menegus laid out some of the reasons why he thinks Uber stock is a hopeless cause, including the fact analysts believe the ride-hailing app company might not become profitable until 2024.
“In terms of percentage losses, Uber’s dip doesn’t even scratch the surface of the worst IPOs. But the staggering valuation of the company makes it, in raw scale, ‘among the top 10 IPOs ever’ including companies outside the U.S.,” University of Florida professor Jay Ritter told Gizmodo in a phone interview. “That single digit decline resulted in an estimated $617 million paper losses.”
You’re speaking to the choir, Bryan.
On May 9, I wrote a piece for InvestorPlace that recommended investors NOT buy Uber on its first day of trading following Uber IPO because it was likely to open significantly higher than its IPO price of $45.
In my defense, I was basing my observation on a potential valuation of between $80-90 billion. Uber’s IPO valuation came in at $76.5 billion, well below what analysts were expecting, and significantly lower than the high-end, pre-IPO valuation of $120 billion.
Missing a target by as much as 36% is a cause for concern and a big reason why investors put the brakes on.
What Does This Have to Do With Wayfair?
It never ceases to amaze me how many investors will invest in companies that lose money. Call a company a “disruptor” and all logic goes out the window. Who cares how much money it loses?
CNBC named Uber to its 2018 “Disruptor 50” list, ranking it second behind only SpaceX, Elon Musk’s space business. While the CNBC piece talked about the great things happening at Uber, it finished by gushing over the amount of money ($21 billion) the company had been able to raise to that point in its history.
But a company is not a disruptor because it’s able to raise $21 billion in venture capital funding; that only makes it well-connected and good at raising capital. That’s the extent of it.