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Is Uber’s IPO the worst-ever in stock market history?

With online sharing services expected to be utilized by 86.5 million people by 2021, it is evident the sharing economy is now mainstream. One of the leading practitioners globally of this trend is Uber. The taxi app continues to lose billions of dollars despite its significant growth to 91 million users and expansion into new businesses. This growth in its user base, and the desire to obtain more money for future growth, were the drivers behind its IPO, which was activated on May 8, 2019.

Uber’s arrival on the stock market saw it price its initial public offering at $45 US per share (and the company raised close to $25 billion, making it one of the top ten biggest IPOs of all time). However, by May 10, Uber’s shares closed down nearly 8 per cent from the $45 initial public offering price. The was described by The Financial Times as “one of the worst debuts for a big U.S. listing.”

According to University of Florida’s Professor Jay Ritter, Uber’s 7.62 percent decline following its debut on the New York Stock Exchange makes it “bigger than first day dollar losses of any prior IPO in the U.S.”

One problem with Uber is that the technology it uses may one day be replaced by something better, either from Uber itself or a rival. To add to this, its workforce has a high turnover and is low paid, plus prone to strike action over pay and conditions (as recent event testify). Add to this the uncertainty of when autonomous cars will be mainstream and whether or not Uber will still dominate the autonomous car ride service in the future.

Uber suffers from another issue with consumers, which relates to safety, according to Jumio’s Global Trust and Safety Survey. The survey showed that only two-thirds of U.S. adults feel “very safe” or “somewhat safe” using online sharing services like Uber or Lyft, and one in five U.S. adults feel “somewhat unsafe” or “not safe at all. A company like Uber needs to address this if it is to grow its user base further.

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