Nasdaq Drops 6.3% in 6 Days, as Uber & Lyft IPOs Turn into Colossal Flops. S&P 500 Chart Not Pretty

Nasdaq Drops 6.3% in 6 Days, as Uber & Lyft IPOs Turn into Colossal Flops. S&P 500 Chart Not Pretty by Wolf Richter for Wolf Street

Russell 2000 back where it had first been in November 2017.

This market, after a historic rally despite declining corporate earnings in the first quarter, was looking for a trigger, any trigger, and it foun a trigger, or triggers. But the trade war cannot explain the colossal flops in the over-hyped IPO realm.

The Nasdaq composite dropped 3.4% today. In the six trading days since its peak on May 3 (8,164), it has dropped 6.3%, after a historic surge of 32% from December 24 through May 3. I mean, what did you expect? The index is now back where it had first been on June 6, 2018.

Uber, which had sold its China operations and is no longer significantly tangled up in the US-China trade war, is morphing from the biggest, most hyped tech IPO in recent memory into the most colossal flop in recent memory. Shares plunged nearly 11% today to $37.10 a share. This left shares down 17.6% from its IPO price of $45, at which Uber had extracted another $8.1 billion from gullible investors.

Prior investors are even deeper in the hole. Uber extracted nearly $7 billion from institutional investors between December 2015 and February 2017 by selling them 140 million shares at $48.77 a share, over half of them to Saudi Arabia’s Public Investment Fund, and these folks are now down nearly 24%. Shares of Softbank, which also holds a large stake in Uber, fell 5.5% today.

Lyft dropped another 5.7% today, to a new closing low of $48.15. Lyft had been the trailblazer this year for the hottest most hyped IPOs.

On March 28, Lyft priced the IPO shares at $72 and extracted at this price about $2.3 billion in new money from IPO investors. On March 29, the first day of trading, it took hours of machinations before shares finally started trading, with a heavily mediatized “pop” of 21%, at $87.24. Then, Lyft shares plunged 10% in 4 Hours from “pop” to close. Today, shares were down 45% from the pop.

Both Lyft and Uber have no idea if, when, or how they’re ever going to reach a self-sustaining business model that doesn’t burn large amounts of investor cash every year. Now, since their IPO, they’re loaded up with cash to burn and can fuel their cash-burn machines for a little while.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.