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Steve Harmon - Uber or Ooops?

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IPOs ain't what they used to be
 

Steve Harmon

May 13 · Issue #24 · View online
Beyond the hype, inside the world of venture capital, tech, stocks and trends, from Silicon Valley to Shanghai, from veteran investor and entrepreneur Steve Harmon - followed by many leaders in finance and tech, see more: http://steveharmon.com

IPOs ain’t what they used to be

Uber IPO Bombs, Here's Why
Ride-sharing company Uber went public and (yawn) … bombed. No surprise. They just don’t make IPOs like they used to.
Back in the mid to late 1990s there were many public offerings. Yes, some were questionable. But many were solid companies making their splash on the public markets. Fledglings. Their valuations were WITHIN REACH of everyday investors to enjoy the upside.
Yet today’s public stock market is really a market of LAST RESORT where the venture and private equity fund investors look to cash out, leaving the burden of an often overvalued company in the hands of the public, bloated, obese whales floundering on the polluted beaches of the NYSE and NASDAQ.
It’s comical that Uber’s CEO tries to explain away how Uber is just like Amazon or Facebook and somehow is misunderstood now that it’s public. That over the long haul Uber will follow the same path.
First of all, Amazon went public at well under $500 million. That left plenty of upside for mom and pop investors. I know because I was the first analyst (before its bankers even) to recommend AMZN way before Wall Street knew the boring old book site could be anything but a boring old book site.
Oooper
The idea of a ride sharing company is brilliant. No doubt. The question here is the valuation. Uber went public at a value north of $80 BILLION.
Let’s do the math:
Amazon IPO = $438 million.
Uber IPO = $82 billion.
Yes, there are vast differences in revenue and stage of growth. Which is the point. Public markets aren’t getting access to early-stage deals any more. The large hedge and private equity funds, sovereign wealth funds, all invested in Uber as a private company, fueling massive growth.
That growth has been realized and the value TAKEN OFF THE TABLE by these guys.
I would have rather seen an Uber IPO several years ago at a few billion valuation where the mainstream investor could have realized the upside. Now it seems the company is left trying to convince everyone that there is a 10x run from here.
Bull run?
I believe the easy growth for Uber is gone. The taxi market takeover. Mission accomplished. To get more value ahead requires growth into areas such as freight, logistics, moving atoms and Adams around the planet.
That could mean semi-decent growth ahead.
It’s just a shame that we now have an IPO market that no longer caters or seems to care about average investors.
Solutions
flush
At one time in the Internet space we had innovations, private market exchanges, IPOs at early stages. Yes, there was more risk. But more upside also.
These days NYSE and NASDAQ are like baby sitters taking care of grown ups rather than promising teen superstars.
In other words, dead markets. Bloated and in need of liposuction. And yet gorging on the fat of over-funded and over-valued companies in a farcical charade called “IPO.”
If there’s ever a need for innovation it’s in this stagnant IPO process. Roto rooter anyone?

-sh
steveharmon<at>gmail.com
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