(Bloomberg) – Morgan Stanley acquired the largest US IPO in the last five years. Now it is the second time to guess after Uber Technologies Inc. collapsed by 18% in the first two trading days.
On Wall Street, the questions fly: Why did bankers, including Morgan Stanleys, suggest $ 120 billion last year? Uber could not deliver? Has the syndicate led by the company set the price of the IPO too aggressive? And did they direct too many stocks to big investors who made hollow pledges to keep them long term?
"Looking back, underwriters should have figured out how much real demand was," said Jay Ritter, a professor at Warrington College of Business, University of Florida, who specializes in IPOs. "But insurers generally find it hard to figure out how much buy and hold demand is compared to flippers."
The debate over how well Morgan Stanley and other banks handled the tent offer is hindered by many abuses, including the sudden flare-up in US-China trade negotiations that affected markets around the globe There is also a broad, gnawing concern over the fondness of Silicon Valley for delays in stock market listing until start-ups have reached their full size: who else can buy?
Many first-class investors already had Uber shares last week, which could potentially curb their appetite for the $ 8.1 billion they sold. Attendees included clients from Morgan Stanley's Wealth Management Department, such as For example, family offices that had the opportunity to shop privately. Even some in Uber's leadership began to regard the round as a "follow-up investment" rather than a new public offer, two people said.
Nonetheless, people with knowledge of the situation stated that the order backlog was at least three times as high.
A spokeswoman for Morgan Stanley declined to comment on this story.
An investor in a billionaire shop recalled other concerns that went on sale.
He said he had become suspicious a few days before pricing because the bank syndicate continued to seek assurance that its company would not tilt the stock. The bankers telegraphed on, but there were plenty of retail investors hoping to buy after the debut, which could cause the price to at least "snap" for a short time and give them the chance to make quick and easy profits, the investor said , His company eventually lowered its final order.
The stock climbed 1.5 percent to $ 37.65 at 4:25 am New York time in US pre-market trading. The stock plunged 7.6% on its Friday trading debut, losing another 11% on Monday.
Morgan Stanley has tried to stabilize the price, according to Uber. As Lead Underwriter and Stabilization Agent, Morgan Stanley has the right to sell additional shares through a greenshoe option. Usually, banks may either receive these shares from sellers in the context of the IPO or buy them on the open market, which helps to support the price when trading begins. It is unclear to what extent Morgan Stanley did this.
At least one of Uber's biggest investors, who are now in the red and talking on the condition of anonymity, expressed frustration, suggesting that the bank should have backed the price from the start. However, this could have left the investment bank with less firepower to shore up the stock if it slipped further in the following days.
Morgan Stanley has earned a reputation for staving off megawatt IPOs from major competitors such as Goldman Sachs Group Inc. which ranked second on Uber's bid documents. Some praise the stubbornness – and others the skill – of the tech banker Michael Grimes of Morgan Stanley and his colleague Colin Stewart of the stock markets. Both are veterans of the industry who are able to reassure customers as we have experienced before.
Uber, perhaps the player whose opinion matters most, has not blamed the bank. In a letter to employees, CEO Dara Khosrowshahi blamed the poor market opening: "Obviously, our stock did not perform as well as we had hoped after the IPO. Today is a tough day on the market again and I assume that this also applies to our share.
Uber's $ 45 IPO on the IPO led the company to a valuation of $ 75.5 billion. The stock closed on Monday at $ 37.10. A market valuation of $ 120 billion would help Khosrowshahi and other executives unlock share prices.
It is possible that the early trading difficulties are not permanent. Morgan Stanley has done some of the most famous and notorious tech IPOs ever made – Facebook Inc., for example – that were originally considered one generation companies before they fully emerged.
Uber looks "kind of" like what happened to Facebook, "said David Erickson, a finance professor at Wharton School, University of Pennsylvania. "The balloon was emptied on the first day."
(Adds market share gain in the 10th paragraph.)
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