The first thing is bad new I’m afraid. There is very little chance that you will be able to invest in the actual Uber IPO. That is reserved for institutions, funds and very special customers of US brokers like Fidelity.
However, you can still speculate on the Uber IPO and buy shares after the new issue becomes listed on the stock exchange.
How can you trade the Uber IPO?
If you can’t flip, or stag the IPO new issue, by buying shares and selling them straight after listing you can still speculate on how the Uber IPO will perform.
Generally, there is a significant share price move after a company lists for the first time on a stock market. If the IPO is oversubscribed, then the share price should go up.
But of course, not always, it depends on how the new stock was priced to begin with. With a household name like Uber, it’s likely there will be significant post-float demand from private investors. But this doesn’t mean it will go up. There are likely to be a huge amount of sellers, Venture Capital funds, and early-stage investors, who have been invested from the beginning will use the IPO to sell their stock and take their profits.
If you still want to speculate on the Uber IPO you can do so through IG‘s gray market. Speculating on the gray market isn’t buying or selling Uber shares. It is instead betting on what Uber’s total market capitalisation will be at the end of its first day of trading.
According to MarketWatch, the expected Uber IPO market cap is around $83billion. The current IG Uber IPO grey market price is 96-100. This suggests that IG expect the share to rise, making the end of day market capitalisation of Uber between 96-100 billion.
If you think that Uber will be worth more than the $100bn, you can buy the market. If you think that the price will be less than $96bn, you can sell. The market doesn’t roll it expires as below…
It’s important to note that just because IG think the market capitalisation of Uber post IPO will be between $86-$100bn that it doesn’t mean it will. It’s their best guess and no-one really has a clue what is going to happen to the price until the bell rings.
If you want to trade Uber shares after the share becomes listed you have a few options.
For short term speculation on margin, you can trade via spread bets or CFDs.
It’s worth noting that spread betting and CFDs are leveraged products and are not suitable for inexperienced investors.
Or if you want to invest in Uber in the long term you’ll need a stockbroker that offers access to US stocks. As Uber is one of the biggest household names in the world, most stockbrokers should be providing access.
See here for a list of stockbrokers in the UK.
The below has been provided by ETX Capital
After years of speculation and anticipation, Uber’s much-awaited IPO is finally upon us. It’s one of the biggest companies of the decade and is now a household name in many different territories, so a lot of people feel that it’s about time Uber was listed on the stock market. But now that it is, will Uber be worth trading?
How did Uber’s IPO come about?
A company becoming public is often a sign of stature and strong economic performance. Given the scale Uber operates on plus the sheer number of people who use the service, there was a significant amount of pressure on founder and now former CEO Travis Kalanick, to push the IPO through. He stood his ground though, but when predecessor Dara Showahawhi took over in 2017, things changed.
Uber was already taking on a lot of private investment, an incredibly amount considering the San Franciscan-company’s age, but Showhaowhi believed the company was experiencing all the negatives of being a public company and none of the positives.
So, in 2018 the order was put through, incidentally around a similar time to Lyft, Uber’s major competitor, and here we are.
Is Uber a great opportunity?
Hindsight is a wonderful thing. Think of how badly any trader would want to go back to the early 2010s, invest a few hundred pounds or so in Bitcoin and then sit back and watch their fortune grow. Or invest in Apple Inc. shares in 1980 all those years ago. But of course, for every Apple or Bitcoin investment that’s going to give you a very handsome ROI, there’s a thousand other similar investments that have returned nothing to its backers.
However, the difference is that Uber is already an established corporation that operates on a global scale. It may not have much experience as a public company, but the scale and revenue that the firm generates means it may as well have been one for the past few years – as Khosrowshahi alerted to when citing reasons for the IPO.
So, it seems like it could be a great opportunity to invest in a global super-company from the very start, with the added safety net of the investment not being a gamble on an unknown entity. However, those who have dug a little deeper into Uber will know that on second viewing, it’s perhaps not such a straight-forward and attractive investment for traders.
All the excitement surrounding the IPO was marred slightly by mass-strikes from Uber drivers across the world just two days prior to the stock being listed on the market. A number of drivers across major UK cities including London and Glasgow, as well as New York, Washington DC, LA and other US cities, are all involved, protesting against poor pay and demanding employee benefits, influence on major company decisions and more transparency from executives over Uber’s future intentions.
Of course, the timing is not exactly a coincidence, with the strikers using the IPO to gather as much attention as possible, but it just undermines the issues that Uber are facing. At a time where positivity should be exuding out of the company from all directions, the big occasion is being marred by internal problems.
They’re aiming to get an increase in pay, with many claiming that the introduction of a minimum wage is necessary, as well as the working rights of any other employee at a, so-to-say normal company. With the people at the top set to make billions from the float, poor commission rates for drivers has specifically angered much of the workforce.
This unrest is unlikely to simply go away overnight, and the issue is something that may hinder the price of Uber on the market in the coming months.
Uber is losing money
One reason the previous issue almost certainly won’t be resolved quickly is the fact that Uber is losing money, and a lot of it at that. It’s no so worrying considering Uber’s goal and the fact that it’s a relatively new firm. Favouring growth over profit is common for new companies looking to expand and that’s what Uber is going for.
However, one consequence of Uber’s quest for dominance is offering their drivers low pay. To increase demand and get people using their service, Uber have had to enter what was already a fairly saturated market from the supply side (it’s relatively easy to become a taxi driver – simply obtain a taxi license, sort insurance and a own a car) by offering very low fares to customers. With drivers earning a share of the ride fare, their actual wage is often significantly less than the real living wage.
For Uber to pay their drivers more, they’d have to cut further into the little profits (25%) that they are currently making from each fare – which could make the low fares for consumers unsustainable.
So, should I invest and trade Uber?
Of course, if you believe Uber won’t prosper on the market, you can always open short positions. However, with a new equity as big as Uber, it seems the opportunity is greater for backers of the company. With natural market fluctuation usually increasing equities prices over time, it’s not too likely that in a year’s time Uber’s price will be less than what it is initially offered at.
So, whether investing in Uber is for you depends on a couple of factors.
Firstly, will Uber overcome the two major issues that they’re facing at the moment; an unhappy labour force and profitability. If you believe in their strategy and ultimately their CEO, then that suggests that they will be able to overcome the issues that may otherwise hinder the long-term profitability of trading Uber.
Secondly, will Uber’s other ventures be successful? Despite a few bumps along the road, they still have established a very efficient and highly popular transportation service for customers. Were they to solely focus on the progression of their rideshare business model and also work on making operations more efficient, it would seem more likely that they’ll further dominate the industry for years to come – thus Uber stock would be a decent investment.
However, they of course have other ventures as well. UberEats has largely been successful up until this point, but how much focus will be on this aspect of the business forthcoming? Uber is also looking into autonomous (self-driving) vehicles as well.
This could be seen as either a positive or a negative. A breakthrough could completely revolutionise the industry and the way we travel. Alternatively, it could be a fruitless venture where billions are thrown into development, but little comes back out.
Determining whether Uber will prosper away from the current rideshare path is another factor in ascertaining whether you should invest in Uber.
When can I trade Uber and how much will Uber’s share price be?
Uber is set to go live on the stock market on Friday under the name ‘UBER.’ Its price is not yet clear, but the firm is expected to have an initial listing of around $44-50, with an IPO market cap of $83 billion.
Where can I trade Uber?
You can trade Uber with ETX Capital. Their exclusive TraderPro platform has won multiple awards in 2019 alone and will offer the stock as soon as it’s released on Friday. Sign up for an account and be trading within just five minutes.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of retail investor accounts lose money when spread betting or trading CFDs with ETX. You should consider whether you understand how spread bets or CFDs work and whether you can afford to take the high risk of losing your money.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.