6 Nov

Uber Lockup Expiry: More Downside after All-time Low?

WRITTEN BY Anuradha Garg

Uber’s (UBER) IPO lockup period expires today, meaning early investors will have the opportunity to sell their stock. As reported by Business Insider, Wedbush analyst Daniel Ives estimates that close to 763 million (or $20 billion) additional UBER shares will hit the market. Ives added that the expiration could “cause an avalanche of selling as early investors and insiders hit the bid, which remains a major Street worry around near-term pressure.”

Jim Cramer on Uber lockup expiration

CNBC’s Jim Cramer has also warned that Uber’s lockup expiration “could hobble the entire market.” He thinks Uber’s expiration could be worse than Beyond Meat’s (BYND). When its lockup expired on October 29, BYND stock plummeted almost 19%.

Uber stock tanked post Q3 results

What’s even more concerning is that Uber stock fell 9.8% yesterday after the company reported better-than-expected results. Uber’s active user base grew 26% in the quarter to 21 million. However, this growth declined from the second quarter, when its user base grew 30%.

The stock closed at an all-time low of $28.02 yesterday, about 38% below its IPO price. Analysts were especially concerned about the company’s food-delivery business and bookings growth. Its Uber Eats EBITDA loss widened to $316 million, which caused the segment to lose money. Many analysts cut their target prices for Uber after its Q3 results.

Analysts reduce target prices before Uber lockup expiration

Wedbush, for example, reduced its target price from $58 to $45. Barron’s reported, “Wedbush’s Ygal Arounian gave the quarter a B- grade, citing underlying misses that would be viewed mixed to negative.” Barron’s added, “Raymond James analyst Justin Patterson said he expects the stock to come under lockup-related pressures on Wednesday.” He said, “Post-lock-up, shares set up as a cleaner story for 2020.” Susquehanna lowered its target price for Uber from $42 to $31.

Uber stock supply to overwhelm demand?

Bloomberg reports Evercore ISI analyst Benjamin Black “said it could take the market around 100 days to digest an additional supply of around 1 billion shares, based on current trading volumes.”

Investors should, however, note that not all companies’ stocks come under pressure as their lockup period expires. Uber rival Lyft’s (LYFT) stock, for example, fell just 1.5% when its lockup period expired, much less than what analysts were expecting.

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