(Bloomberg) -- Investors in Uber Technologies Inc. are bracing themselves for the end of a lockup period on Wednesday that’s expected to flood the market with shares of the ride-hailing giant. Those worries -- following lackluster quarterly results -- sent the company’s stock to an all-time low on Tuesday, after months of downward movement.
The lockup period expiry, which will allow early investors to sell stock to a skittish public market, comes on the heels of a rocky earnings report for the company on Monday. Uber’s food-delivery business and bookings growth underperformed investor expectations, overshadowing a pledge by the money-losing company to achieve profitability by 2021.
But the stock’s mostly downward trajectory since its much-hyped initial public offering in May has some investors wondering if the deluge of new shares will mark a turning point.
“The one thing that is holding back Uber shares is the enormous lockup expiration that starts [Wednesday], and it is tough to get a lot of these long-only investors into the game ahead of such a mass supply hitting the market,” Evercore ISI analyst Benjamin Black said in a phone interview.
There’s no consensus on the number of shares that will start trading on Wednesday. RBC Capital Markets analyst Mark Mahaney estimated that roughly 1.7 billion shares will become eligible for sale. Wedbush Securities’ Daniel Ives said he expected 763 million will hit the market. The company had about 1.7 billion shares outstanding as of Sept. 30, according to Bloomberg data.
IPO specialist Renaissance Capital estimated that about 1.5 billion shares will be released for trading, which would make the expiration of Uber’s lockup the second-largest ever for a venture capital-backed company, the firm said, behind only Alibaba Group Holding Ltd.’s 1.6 billion shares.
Black said it could take the market around 100 days to digest an additional supply of around 1 billion shares, based on current trading volumes.
Uber’s earnings on Monday beat estimates on both revenue and loss, and could be encouraging for investors who look most closely at traditional metrics, Black said. Those investors could start taking positions once the market processes the new supply, he added.
“It’s just that right now there is a buyers’ strike and the shorts can get pretty aggressive,” Black said.
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