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This week, at least 15 companies have priced for IPOs – but there’s only one that I care about…
And that’s Uber Technologies Inc. (NYSE: UBER).
Investors have been readying their wallets since the ride-sharing platform filed for its IPO last month. But this morning, the company officially started trading publicly, and it’s expected to be one of the biggest technology IPOs in history.
But don’t get too caught up in the excitement – if you aren’t careful, Uber could end up taking every last penny that you’ve worked so hard to make.
Here’s why…
The Only Way to Avoid Losing Money on Tech’s Biggest IPO
Uber anticipates its IPO to be valued anywhere from $80-$90 billion, making it the biggest tech IPO since Alibaba Holding Group Ltd. (NYSE: BABA) in 2014, which raised $21.8 billion. Uber has already received billions of dollars in investments from companies like PayPal Holdings Inc. (NASDAQ: PYPL) and Toyota Motor Corp. (NYSE: TM) too – and it’s big names like those that make Uber a pretty attractive investment to a lot of people.
But there’s a major warning sign flashing around Uber’s IPO, and it’s thanks to a recent IPO’s performance from the ride-sharing platform’s biggest competitor…
Lyft Inc. (NASDAQ: LYFT) has been a total train wreck since its IPO, from a plunging share price to a massive earnings miss. It’s exactly what I saw coming when I warned against buying Lyft in March.
Lyft shares started trading at $72 on March 29, 2019, and just one day after its IPO, shares began to drop. And they haven’t stopped since – Lyft shares are currently trading at $61. That’s 15% below the company’s IPO price.
To top it off, Lyft released their first quarter earnings on Wednesday (their first public report) – and the company lost a staggering $1.14 billion in the first three months of the year.
Now, it’s important to note that Uber and Lyft are based on two very different business models. While they are both ride-sharing apps, Lyft is mainly focused in the U.S., while Uber has grown globally. Uber has also expanded into markets beyond ride hailing, like food delivery, freight, and even healthcare.
But Uber has some major issues, and they’re strikingly similar to Lyft’s…
- Major Operating Losses: Uber lost $2.3 billion in 2018 – that’s even more than Lyft lost for the year, and there’s no clear path to profitability in sight.
- Driver Disputes: Drivers for both Uber and Lyft staged a strike on Wednesday, as thousands of drivers in major cities like Los Angeles, New York, and Washington, D.C. protested for higher pay and more job security. The argument between the company and its drivers is one that will likely last beyond Wednesday’s protest too, as governments start to get involved.
In December 2018, a U.K. court classified Uber drivers are employees instead of contractors, giving them rights to minimum wage and paid holidays. Around the same time, New York City passed a law giving drivers a minimum wage after expenses. And laws like this should worry investors…
In Uber’s IPO filing, the company said that reclassifying its drivers as employees instead of contractors “would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.”
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Uber might be on track to have the biggest IPO of the year, but it isn’t one you should dive headfirst into. That’s why we’re going to hold back on this one – there’s really only one way to ensure you won’t lose tons of money on this, and that’s by waiting. Let’s watch how it plays out instead.
It’s sure to be an interesting one to watch – whether it tanks like Lyft or not. And even if we’re holding back on Uber for now, it doesn’t mean we will forever. The world’s biggest ride-sharing platform could end up adding some serious cash to our wallet one day.
Take Facebook Inc. (NASDAQ: FB), for example. In the four months after its IPO in 2012, the company’s share price plunged 50%. Now, it’s one of the world’s most valuable companies, with a market cap that’s almost $550 billion. Maybe one day, Uber could end up putting 230.72% combined gains in your pocket – just like Facebook has done for my readers so far this year.
Now, earlier this week, I sent you Part 1 of your trader’s Cash Course. (If you missed it, you can catch up right here.)
So I think it’s about time we dive into Part 2…
In this round, I’ll reveal the easy way you can beat Wall Street at its own game.
It all comes down to using this fast-growing money maker they don’t want you to know about…
See it here.
Good trading,
Tom Gentile
America’s #1 Pattern Trader
