Uber IPO: Should You Buy Right Away?

By April 12, 2019trading

News flash: The ridesharing mobile app conglomerate Uber has filed paperwork to go public … and traders are losing their $%&# over it.

Just check out #uberIPO, and you’ll see it’s blowing up the internet — or at least in the trading sphere. With all this hype, you should sell your house so you can buy as many UBER shares possible at its IPO, right?

NO! If that’s how you approach trading, you need to get into an Uber and instruct the driver to take you as far away from your trading gear as possible. That kind of FOMO is what leads to bad trades.

Quick note here: Naturally, these are solely my opinions. I’m sharing them with you to give you insight into how I think about things in the stock market.

That said, let’s hit the pause button on all this madness. Let’s talk through this trendy upcoming IPO to better gauge how to approach it intelligently.

UBER Goes IPO

It’s official: Today Uber filed paperwork to go public. As Reuters reported, “Uber Technologies Inc has decided it will seek to sell around $10 billion worth of stock in its initial public offering.”

Let’s put that amount into perspective: It would make Uber the biggest tech IPO since 2014 when Alibaba (BABA), aka the “Amazon of China,” went public.

In terms of company value, Uber is said to be seeking a valuation of up to $100 billion. This amount might come as a surprise to some, since some sources have reportedly told Uber that its value could be up to $120 billion.

According to Reuters, the lowball amount is inspired by the lackluster performance of Uber’s competitor Lyft, which had its own IPO last month.

Should You Buy Uber Stock Right Away?

While the official IPO date is yet to be announced, plenty of traders are already salivating at the prospect of snapping up shares quickly.

But should you be ready to pounce on shares right at the market open on its IPO date?

Here’s what I think: Just like you wouldn’t get in an Uber without checking the license plate and driver, don’t buy Uber on day one. 

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The reality is that it can be risky to trade an IPO on its first day. Absolutely, it’s shiny and alluring to a lot of people. But what’s the real motivation here? FOMO.

Smart traders actually make calculated trading decisions. That’s what makes them smart.

In short, trading an IPO right at its offering is a straight-up amateur move.

But Is Uber the Next Facebook?

But why not buy shares right away? As some traders might argue, what if Uber’s stock is “the next Facebook?”

Well, actually, Facebook’s IPO was pretty ugly, too. It opened in the $40s, but quickly dipped down to the $20s and stayed there for quite some time.

Those buyers who rushed in and paid in the $40s for the stock right away … they had to hold a losing position for a LONG time before getting their payday. It took over a year for the shares to regain that first-day price.  

Look at What Happened With Lyft

Remember that Lyft, another ridesharing service, recently had its own IPO. So let’s see how it went … it might just give some clues as to what could potentially happen with Uber.

Here’s a breakdown of Lyft’s offering:

  • Day 1: A big red day
  • Day 2: An ugly gap down day
  • Day 3: A green day

Of course, there’s no guarantee that Uber will follow Lyft’s trajectory. But history does have a tendency to repeat itself in trading.

So ask yourself this: Would you rather buy right away and wait for the ugly drop, or learn a lesson from Lyft’s performance and wait a few days?

The Final Word

Let me point something that’s important to remember that with any IPO …  

The initial shares being cashed out belong to the big investors. They’re not keen on unloading at fire-sale prices. So do you really think you’ll get the best price possible on an IPO’s first day?

While it can happen it’s not common.

While Uber’s a great concept and has plenty of fans, that doesn’t necessarily mean you should rush in to buy the stock.

The bottom line?

Don’t get bit by FOMO, and don’t trade like an amateur. Monitor the chart on StocksToTrade and wait for the price action to tell you if and when to buy.

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Have you traded a stock on its first day of a hot IPO? What was your experience? Leave a comment and let me know!

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Join the discussion One Comment

  • Flora Jean Weiss says:

    Thank you Tim for explaining how to look at an incoming IPO stock. It’s like the black Friday sales, “but there’s only a finite number of these ________”
    As a beginner/newbie working/studying/learning (which there is a lot to learn, digest, and understand) all these bits of information fill in gaps and produce more questions.
    I’m glad I have both Tim’s and all the education that’s available to learn from. I’m working diligently with the small pieces of time that I have available.
    The webinars are all very helpful.
    Thank you again.

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