With the fanfare being awarded to Uber's (UBER) IPO this week, you would've thought the company cured cancer or discovered a clean, renewable energy source. I suppose they did convert the everyday, household vehicle into a potential money-maker, and clearly disrupted the transportation industry.
Taking a cue from Lyft's (LYFT) current post-IPO disappointment, Uber is raising its $8+ billion at a price near the bottom end of its $44-50 price range as the shares were priced at $45. Given that the company lost over $3 billion from operations last year, the more cash the better.
While the company won't provide specific guidance, Uber appears to hope 2019 will be a trough for losses. Lyft has said the same. Nothing like coming public when your losses are maybe at their lowest point. Don't confuse this to coming public at peak growth, which can also be a disaster. But these are two different notions.
Markets will want proof, and quickly, that Uber can stem the bleeding and begin a march toward profitability. It's possible the company never becomes profitable. Companies coming public at peak growth face the challenges of earnings multiples, but a company with nothing but losses faces the greater challenge of liquidity and survivability.
One has to wonder how patient SoftBank will be with its Uber investment. Their stock is already getting hit on Friday morning before Uber even begins trading. I anticipate we'll see a correlation develop between these two names, but one has to think if Uber finds a way to rally off its IPO, Softbank may look to hedge some of its position once options open. I could envision a collar or covered call strategy (rolled, but never exercised). It could create resistance on the stock once options open.
In terms of chatter, Uber stock has been universally panned by traders on social media. While there is lots of media excitement, the consensus appears to be: avoid the stock. The irony may be since everyone appears to hate it, it will do well in the early going.
I'll definitely watch Uber for a flip opportunity on the long side, but it's not a name I would envision carrying overnight long or short, if one could ever get shares to borrow. The likelihood of that happening in the first few days is slim and the borrow costs will likely be high.
Unless you are willing to sit at your monitor non-stop once trading begins Friday, there's no need to force a trade. It's going to be fast and volatile. Even more challenging, is there is no fundamental edge today, so unless you are willing to immerse yourself into the world of charts, indicators, and price action, simply sit back and watch the action. At the very least, it should provide us lots of entertainment.
Beyond scalping, I have no desire to pay $70 billion, $80 billion, or $100 billion for Uber shares in terms of valuation. So, it's a trading only name for me, and I wish those luck who view this one as the next $250 billion "can't miss."
Eric Jhonsa will be hosting a live blog on Friday at 11:30 a.m. ET to answer reader questions about Uber's IPO and other tech stocks. Please check the Real Money home page at that time to join us.