Price Stabilization
Morgan Stanley has been trying to steady Uber’s price, according to people briefed on its efforts. As the lead underwriter and stabilization agent, Morgan Stanley has a right to sell additional shares via a so-called greenshoe option. Typically, banks can either get those shares from sellers in the IPO, or by snapping them up in the open market, which helps to support the price as it begins trading. It’s unclear to what degree Morgan Stanley has done so.
At least one of Uber’s largest investors, now in the red and speaking under the condition of anonymity, voiced frustration, suggesting the bank should have propped up the price more from the start. Yet that could have left the investment bank with less firepower to support the stock if it were to keep sliding in the days that followed.
Morgan Stanley has built a reputation for wresting megawatt technology IPOs from major rivals including Goldman Sachs Group Inc., which was listed second on Uber’s offering documents. Some credit the tenacity -- and others the showmanship -- of Morgan Stanley tech banker Michael Grimes and his equity capital markets counterpart Colin Stewart. Both are veterans of the industry, able to reassure clients, we’ve been here before.
Uber, perhaps the player whose opinion matters most, hasn’t faulted the bank. In a letter to employees, Chief Executive Officer Dara Khosrowshahi blamed the poor opening on the markets: “Obviously our stock did not trade as well as we had hoped post-IPO. Today is another tough day in the market, and I expect the same as it relates to our stock.”
Uber’s $45 stock price in the IPO gave the company a $75.5 billion valuation. The shares closed at $37.10 on Monday. A $120 billion market valuation would help Khosrowshahi and other executives unlock equity awards.It’s possible that the early trading travails won’t last. Morgan Stanley has handled some of the most famous and infamous tech IPOs of all time -- Facebook Inc., for example -- that initially fell before fully emerging as once-in-a-generation companies.
Uber looks “kind of like what happened after Facebook,” said David Erickson, a finance professor at the University of Pennsylvania’s Wharton School. “The balloon got deflated on the first day.”
This story provided by Bloomberg News.