How Uber Falter Affects Slack’s Falter?
Uber’s long-awaited IPO was a huge disappointment to most investors right at the start. When the stock fell above 10% and it is now that it is clawing its way back to the opening prices. Charts show that it is only up 1% from its IPO, or almost flat. This might cast a shadow over IPOs of other companies like Uber & Slack that have been long on growth though short on profits.
Uber & Slack Have Same Challenges
Although Slack is not the same as Uber it still faces almost the same challenge of being a growth story with less or no profits to show as yet. Slack-a cloud-based software company specializing in making collaboration tools and apps. It has recently released S-1 filing with the Securities and Exchange Commission. Now has shown the estimated results for 04, 30, 2019, with collected revenues of about $133 million. And $134million, and a gross loss of close to $39.5 and $38 million.
When these companies go public, the expectation investors will perceive is that accelerating growth at 50-100% annually. It consumes a lot of marketing and capital expenditures. They hope that spending will eventually plateau as a company reaches a critical mass; costs fall, and if lucky, margins could improve.
Fear to Dive in
No one can tell when any startup may get off that high-cost growth treadmill. And stay off it, such that margins can improve and profits materialize. This reality may spook stock investors who did not flock to stock Uber. And its promise of future growth and a path to profitability. Even with “adjusted” earnings metrics—for example, stripping immeasurable funds in autonomous vehicle research costs or incentive pay raise to get new drivers—investors question how much Uber is worth.
Other corporations considering IPOs, having seen what happened to Uber, might closely watch Slack’s launch, waiting to see how the market reacts. Uber probably has not had truly reasonable pricing for many years, it’s a huge lesson about how rewarding or punishing the public markets market can be.