Dara Khosrowshahi, CEO of Uber Inc. Center, rings the opening bell under the company's original offer (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, USA, Friday, May 10, 2019.
Michael Nagle | Bloomberg | Getty Images
For Uber shareholders, Wednesday is a landmark day, and presents the first opportunity for most of them to sell shares since the company's IPO six months ago.
Wedbush analysts warned in a Nov. 1
But those nervous about a flood of stocks hitting the market from investors looking to lock in gains can provide some comfort in this: A bunch of that stock is underwater and even deeper in the red following Tuesday's 9% plunge for $ 28.38.
Of the approximately 1.7 billion Uber shares outstanding, about 1 billion have been unlocked since the May listing. Wednesday is the expiration date, and according to analysts at MKM Partners, about 90% of Uber's shares will be available for sale, with some insiders still restricted from unloading portions of their stake.
According to the company's IPO prospectus, approximately 545 million shares (32% of today's outstanding offer) were purchased at $ 32.97 or higher. Remember that Uber was the poster for the unicorn era, collecting lots of late-stage capital between 2014 and 2018 after it became a dominant ride-hailing platform and household name, even though it burned billions of dollars in cash.  Most of these investments looked smart when Uber priced its IPO at $ 45 in May. But the shares have since lost 37% of their value, and got their last blow after Uber reported a quarterly net loss on Monday afternoon of over a billion dollars. Private market investors experience the pain when Uber tries to convince Wall Street that a sustainable business is on the horizon – CEO Dara Khosrowshahi said Uber is targeting "total company's EBITDA profitability for the entire year 2021."
Managing Director of Softbank Group Masayoshi Son attends a news conference in Tokyo on February 8, 2017.
Alessandro Di Ciommo | NurPhoto | Getty Images
SoftBank was by far the largest buyer of shares before listing, but major US financial firms such as Morgan Stanley, Fidelity, TPG and Tiger Global also participated in the financing, as did Baidu and CTIC from China. In those days, growth and market control were what mattered. Loss meant little because it was a new pipeline of investors who were enthusiastically willing to fill the gap.
As of this year, PayPal agreed to buy $ 500 million of shares in a private placement at a listed price. PayPal said on its third-quarter earnings last month that the investment in Uber, as well as MercadoLibre, resulted in a hit for profits and "created more earnings volatility."
Selling now of some late-stage investors acknowledging poor performance has made it even worse by the fact that the broader US market has experienced sustained upturn, with the S&P 500 and Nasdaq rising to record highs on Monday. Some investors were a little off the list. For example, SoftBank sold 5.5 million shares (2.5% of its stake) in the offering and TPG unloaded 1.4 million (4.3%).
Early investors and employees are still doing well. In June 2014, five years after the company's existence, Uber raised cash at $ 15.51 per share, and a year before that the price was $ 3.56. Options issued at that time are still very much money.
In addition, SoftBank gave a lucrative partial exit to early shareholders, including ex-CEO Travis Kalanick, in early 2018, when the Japanese company spent around $ 6.6 billion to buy over 200 million Uber shares for 32 , $ 97 apiece. TPG bought 9.7 million shares for about $ 320 million at that price. Later in May, an affiliate of TPG and other companies bought an additional 15 million shares from Kalanick, the first employee Ryan Graves and technology manager Thuan Pham, for $ 40 each.
A spokesman for Uber declined to comment. Representatives from SoftBank and TPG also declined to comment.
In Uber's later days as a private company, it issued restricted stock units (RSUs) instead of options. Unlike with options, employees do not have to decide whether to eventually buy RSUs, but receive them as part of the compensation. They move west over a period of time and then become tradable shares. Uber said in its prospectus that the number of shares excluded well over 100 million shares that would eventually convert from RSUs.
While recipients of RSUs are not at absolute loss, many may have received a tax hit because of the falling stock price. For employees whose RSUs had an IPO, income was taxed based on the $ 45 share price, even though they were blocked from selling for six months.
SE: This is a black-eyed quarter for Uber