Uber Technologies Inc. shares hit a low time on Wednesday when the "lockup" period following the May public offering ended, giving a blow to a company that has struggled to satisfy investors.
The end of the period sent a flood of shares on the market, pushing the stock as low as $ 25.58, down 43% from the stock price. While stock volatility and loss are not uncommon after the end of lending, the $ 2 billion loss from the market's 24-hour capitalization hurt Uber after a tough earnings report this week.
Lockups prevents early shareholders and employees from selling shares in the first few months following an initial public offering. Typically, the expiry of the lockup is very long-awaited, giving employees and early investors an opportunity to get money for equity they have been sitting on. Uber priced the shares in the stock exchange in May at $ 45, giving them a valuation of $ 82 billion. Even before Wednesday's sale, Uber's stock development had disappointed investors.
About 1[ads1]30 million shares traded on Wednesday, much more than the 65-day average of $ 11 million and above the typical trading volume at the end of a lockup, said Jay Ritter, a business economics and stock exchange expert at the University of Florida. It is unclear how many of these were sold for the first time due to the expiration of the lock.
A spokesman for Uber declined to comment.
Wedbush Securities financial services company estimates that 763 million shares were eligible for trading on Wednesday. Of these, Wedbush estimates that 500 million to 520 million shares are underwater, since Uber had several private financing rounds since 2015 at a share price that was significantly higher than Wednesday's stock price. Daniel Ives of Wedbush said 25%, or about 190 million, of the unlocked shares would be competitors to sell Wednesday.
The stock was already down more than 10% this week after Uber's third-quarter earnings report failed to reassure investors. Uber reported higher revenues and a narrower net loss. Following the results, CEO Dara Khosrowshahi said the company expects to make a profit in 2021, on an adjusted basis excluding interest, taxes, depreciation and amortization. The timeline did little to arouse investor enthusiasm.
The company's shares fell 3.8% on Wednesday to close at $ 26.94.
Expected capital-backed companies, on average, see the stock price fall by 2% the day before, the day before, and the day after the end of the lockup, according to Mr. Ritter. Analysts and investors warn that stock losses may continue.
"It's going to get worse from a cumulative point of view," said Eric Schiffer, CEO of the private limited company Patriarch Organization, which supports 10% equity declines over the coming weeks. "And there's not much that pushes this stock forward because investors are skeptical of their real path to profitability."
Finally, investor sentiment does not depend on a trading day, but on Uber's core business development.
Long-term investors have reason to believe in Uber, said Mark Mahaney, an analyst at RBC Capital. Uber's core business remains profitable before interest, taxes, depreciation and amortization, and its leading market share gives the company an advantage in terms of pricing power, he said.
"The ride-sharing business globally is a massive market, and it is becoming increasingly clear that the global leader in most markets is Uber," Mahaney said.
The expiry of the outlet "does not affect the basics of whether Uber can continue to reduce overall losses and convince people that it can become profitable and sustain growth rates," he said.
Menlo Ventures investor Shawn Carolan, who led the firm's early investment in Uber, said Tuesday night on Twitter that the company would hold its shares after the repeal was lifted. "Eight years after the initial investment, we remain inspired," wrote Carolan, crediting Mr. Khosrowshahi's leadership.
Menlo Ventures sold less than half of its Uber stake to SoftBank in a tender offer in late 2017, receiving just under $ 1 billion through sales.
Early Uber investor Lowercase Capital did not sell shares or distribute shares to limited partners on Wednesday when the cessation expired, and has no immediate plans to do so, according to a person familiar with the matter.
Even companies with positive stock development after the IPO can struggle. Social media site Pinterest Inc. saw shares slide nearly 5% in October, the week the lockout ended, following the initial gain after the IPO.
A stock slide after the end of a lock does not necessarily mean a long-term downfall for a company, Mr. Ritter said. He studied the performance of 865 venture-backed companies that held IPOs in the US from 2001 to 2017, and within six months of the end of the lending period, stock prices outperformed those publicly traded companies by 3.4%.
price falls will also attract more equity funds and hedge funds to the stock, which will allow the stock to stabilize, analysts said.
"Many people will wait for the smoke to clear and once that happens, it will be ready to buy," Ives said. "I think you're going to look back on this as a trough in the stock."
– Katie Roof and Sebastian Herrara contributed to this article.
Write to Heather Somerville at Heather.Somerville@wsj.com