Uber’s much heralded public offering has arrived not so much with a bang as with a whimper, thanks largely to the ongoing trade war between the U.S. and China.
Overnight, the U.S. government made good on the threat from President Donald Trump to hike tariffs on $200 billion worth of Chinese goods to 25% up from 10%.
As a result, stock markets slid further on Friday, and their decline hit Uber’s initial public offering. The company’s shares began trading at $42.54, below its initial pricing of $45 per share.
At its initial pricing, Uber was valued at $75.5 billion, below the $120 billion price that Wall Street thought the company would fetch late last year, but still among the biggest public offerings in history. Only Facebook’s $81 billion public offering and the whopping $169 billion debut of Alibaba were bigger, according to a Dealogic analysis cited by Business Insider.
Uber’s historic public offering — which was designed to raise at least $90 billion for the ride-hailing giant — was no match for the equally historic struggle between the U.S. and China’s emerging economic superpower.
The rising tariffs were designed to hit business equipment, but will also affect prices on some $40 billion in consumer goods — ranging from clothes to furniture, refrigerators, washers and dryers.
Trump boosted tariffs after China reneged on certain concessions it had made during the trade negotiations. Chiefly, the U.S. was looking for written commitments from the Chinese government that it would provide less direct support to its state-owned enterprises and loosen restrictions on U.S. companies operating in the country.
Uber’s disappointing debut can’t be chalked up to trade woes alone. Its immediate American rival, Lyft, has seen its stock decline precipitously since its opening at nearly $79 per share. Lyft is now trading at around $55 per share.
Yesterday, Lyft reported its first earnings as a public company, losing $1.14 billion on $776 million in revenue.
While Lyft is focused on consumer transportation, Uber has expanded to include freight shipping and meal delivery as part of its attempts to become an all-in-one hub for consumer and business logistics.
That expansion has come at a cost. The company may have generated revenues of $11.3 billion in 2018, but it operated at a $3 billion loss for the year. And Uber is deeply in the red. With deficits reaching nearly $8 billion by the end of 2018, as MarketWatch points out.
Trade wars, it seems, trump transportation disruption.