Market Overview

Newly Public, Cash-Burning Uber Finds An ETF Home

Newly Public, Cash-Burning Uber Finds An ETF Home

Uber Technologies, Inc. (NYSE: UBER) gained 7.71 percent on Tuesday, but the stock is still down nearly 11 percent from its recent initial public offering price.

In what could be seen as a small amount of good news, Uber is finding some home among exchange traded funds, including the Renaissance IPO ETF (NYSE: IPO).

What Happened

In a statement released Tuesday, Connecticut-based Renaissance said Uber qualifies for inclusion in IPO effective Friday, May 17.

“Uber Technologies, which operates the world’s largest on-demand ridesharing network, raised $8.1 billion by offering 180 million shares at $45,” said Renaissance in the statement. “At pricing, the company commanded a market value of $75.5 billion and qualifies for inclusion in the Renaissance IPO ETF effective Friday, May 17, 2019.”

Why It's Important

IPO debuted in October 2013 and tracks the Renaissance IPO Index. While IPO is a passively managed ETF, the Renaissance IPO Index has the flexibility to add widely anticipated new stocks to its roster on a fast entry basis.

IPO rapidly added Uber rival Lyft, Inc. (NASDAQ: LYFT) following that company's IPO earlier this year. Lyft entered the IPO ETF on April 5. Shares of Lyft are down 38.50 percent since the company went public.

Other recent addition to the IPO include Pinterest, Inc. (NYSE: PINS) and Zoom Video Communications, Inc. (NASDAQ: ZM). Both companies joined the IPO ETF on April 25.

While some recent IPOs have struggled out of the gates, the IPO ETF is down just 3.63 percent over the past month and is still up nearly 28 percent year-to-date. The fund's weight to recent, struggling IPOs matters. For example, Lyft and Pinterest combine for just 2.39 percent of the IPO ETF's weight.

What's Next

Barring a significant rally over the next two days, the IPO ETF is likely to add Uber at prices that are below the initial offering price. The IPO ETF is rebalanced on a quarterly basis and when those rebalances take place, companies that are more than two years old are removed from the underlying index.

Over the past three years, IPO has beaten the S&P 500 by about 1,100 basis points.

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Photo courtesy of Uber.


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