Uber’s IPO was “priced for perfection”, this investor says

Early into its listing on the New York Stock Exchange and Uber Technologies’ (Uber Technologies Stock Quote, Chart NYSE:UBER) debut hasn’t turned out to be the smooth ride investors were hoping for.

But for those of us who resisted the urge to climb aboard the ride-hailing company’s IPO, count yourself lucky, says Jason Mann of EHP Funds, who argues that putting your money in such a newly-minted stock is too big of a risk.

Uber shares fell on Monday, a continuation of the dismal start the stock had Friday when after an initial $45 per share offering, it dropped to $41.57 by the end of the day. (All figures in US dollars.)

Mann says there could be a number of reasons why the market soured on Uber, at least initially, but that a lack of good data on the now-public company should be top of mind for investors.

“It certainly wouldn’t be something we would own at anywhere near a price like this. We don’t own Lyft either. We need at least a year of operating history for us to even evaluate a company,” said Mann, co-Founder and CIO at EHP Funds, to BNN Bloomberg Friday.

“[Lyft and Uber] have been priced for perfection, [but] Lyft has underperformed and Uber’s own workers were striking,” he says. “[Uber] has always been a controversial company in terms of regulatory environment and pushing through something that’s a disruptive technology.”

Uber continues to be under scrutiny over its lack of profitability, with as the company drives forward its expansion plans, both geographically and logistically, branching into scooters and growing its Uber Eats platform. Last year, Uber brought in revenues of $11.3 billion, a 42-per-cent increase over 2017, but operating losses were $3 billion after a $4-billion loss the year before.

Competitor Lyft also had a rocky start since it IPO’d in late March. The stock is now down over 35 per cent since its debut.

Mann says that for the retail investor, making money on an initial public offering is not an easy endeavour.

“These IPOs are interesting because they’re oversubscribed, with a view that you can get a quick flip. So if you can get in before the deal starts trading, it’s usually a good trade,” Mann says. “Getting in after the deal starts trading is often a bad trade. It’s over.”