Uber Stock: Can You Short an IPO?

Uber is finally going public amidst law suits, strikes, and rising political opposition

Internet-based ride-hailing company Uber isn’t making money … and it may never make any money. As Uber prepares to go public, its drivers are on strike. It lost $3 billion last year. Stock in arch-rival Lyft (NASDAQ:LYFT) is down by one-third from its first post-IPO trade, and one of those Uber-ordered Bird scooters was left in front of my house.

Uber Stock: Can You Short an IPO?
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I literally want this company off my lawn.

Can you short an IPO?

A Symbol of the Times

While early investors will become billionaires once Uber goes public, drivers are sleeping in their cars, unable to afford the ride home on the below-minimum wage they’re making.

Founding CEO Travis Kalanick, accused of creating a toxic “bro” culture, was forced out by scandal two years ago. But he still holds an 8.6% stake in the company and stands to have a net worth of $5 billion on May 10. This assumes the IPO prices at about $47 per share, a market cap of $80 billion.

Former Expedia (NASDAQ:EXPE) CEO Dara Khosrowshahi was brought in to replace Kalanick, to humanize Uber. But he has inherited Kalanick’s sharp elbows. Uber regularly lobbies states to overrule cities when they seek to regulate it, and is quick to go to court over any limit on its operations.

Uber insists drivers are independent contractors even when they work full time. In addition to paying out $20 million to settle a lawsuit over the issue, Uber has pushed 60,000 drivers into arbitration. It could wind up paying out another $600 million to settle those complaints. A class action suit was also recently filed on behalf of thousands of Australian Uber drivers.

Uber drivers stand accused in literally hundreds of sexual assaults and rapes. The S-1 mentions a $300 million “appreciation fund” to be spread among 1.1 million drivers, which can be used to buy stock at the IPO price.  Drivers are not amused.

Uber lawyers and lobbyists have been fighting cities over the service for years, and they’re starting to lose. The company will no longer accept new drivers in New York and its license to operate in London may not be renewed. Already in many markets, like South Africa, Uber drivers operate on the wrong side of the law.

Muted Reaction

The reaction of Wall Street to this chaos is a muted “meh”and “how can I make money off this?” 

Many feel the labor troubles are temporary, as Uber is a leader in creating self-driving cars. Those dock-less Bird scooters littering your street can be accessed via the Uber app. Uber is reportedly thinking of buying Bird, after investing in rival Lime.

The Bottom Line

Morgan Stanley (NYSE:MS) was accused of selling a short-sale product to Lyft investors ahead of that IPO. It should be possible to short Uber once it opens, by opening a margin account and borrowing stock on the open market. Some people have already shorted it privately.

Uber began as a symbol of what is possible with clouds and devices, a virtual market created with the aim of reducing urban congestion.

But Uber stock has since become a lightning rod for all kinds of critics. It is going public in part because more private investors want out than want in. The Uber IPO speaks to the limits of the cloud era and rising inequality, a world without pity, everyone hungry for money and power.

Despite our tut-tutting, millions fantasize about being Travis or Trump, regardless of the consequences.

Now, will someone pick up this scooter?

Dana Blankenhorn is a financial and technology journalist. He is the author of the 2018 mystery thriller, The Reluctant Detective Finds Her Family, available at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.


Article printed from InvestorPlace Media, https://investorplace.com/2019/05/uber-stock-uber-ipo-can-you-short-an-ipo/.

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