Our investment fraud attorneys are investigating allegations that investors may have overpaid if they bought stock at Uber’s IPO price. Uber launched its initial public offering at $45 per share. Since then, Uber stock has lost 25% of its value (as of 8/28/19). In recent weeks the company reported a quarterly loss, lower-than-expected revenue, and reported it would cut 400 employees from its marketing group.
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Uber's Investment Bankers Forced to Do "Naked Short" to Prop Up Stock Price
CNBC reported that Uber’s investment bank for its IPO (Morgan Stanley) had to do a “naked short” to prop up Uber’s share price. A naked short, according to Investopedia, involves “selling shares that have not been affirmatively determined to exist.” Naked short selling was banned after the 2008 financial crisis, but there is an exception for IPOs, according to CNBC.
Uber’s investment bankers were already given extra shares to sell in case the stock price needed a boost, according to CNBC. Called a “greenshoe,” extra allotments of 115% of shares are common during IPOs, reports CNBC. But Morgan Stanley needed to go beyond this 115% to try to prop up Uber’s sagging share price, says CNBC.
Some potential investors received advance notice before the IPO that Morgan Stanley would use naked short selling to ensure that Uber’s stock price remained high, according to CNBC. Others were not informed. Some IPO investors may also have a claim against their financial advisor if they received bad investment advice.
Uber's Profit Measurements are Misleading, WSJ reports
According to the Wall Street Journal, Uber used a profit measurement that is not sanctioned by standard accounting practices. In its disclosures to investors, Uber said that it earned $940 million last year in “core platform contribution profit,” reports WSJ. When using standard accounting measures, WSJ reports, Uber had a $3 billion operating loss.
In an article questioning whether Uber could ever be profitable, Forbes noted: “The company that had lost more money, faster than any venture in history, added the distinction of having destroyed more shareholder value in its first two days of trading than any IPO in history – by a wide margin.”
Uber reports $5 billion loss; stock price plummets post-IPO
On August 8, 2019, Uber reported a $5 billion Q2 loss and lower than expected revenue. Immediately following, Uber shares plummeted in after-market trading.
CNBC described the earnings report as “a miss on both top and bottom lines for Uber.”
One Barclay’s analyst said, “Given negative investor sentiment, the complicated nature of its financials and lack of profitability, we are not surprised to see [Uber] shares reacting poorly to results.”
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