The ride-hailing company Uber Technologies Inc has filed the offer document with the Securities Exchange Commission (SEC) for an IPO. It is going to be one of the largest IPOs of all times. And why not? The company’s name is Uber.
The dictionary meaning of the word “Uber” is “an outstanding or supreme example”. As a company, Uber Technologies has been discussed as a case study in management circles. So, when such a company taps the public market for raising capital, it is going to get a lot of attention. This is obvious. I came across this news item from The Economic Times:
Uber unveils IPO with warning it may never make a profit
As per this report, the company, in its filings for the IPO, has mentioned something to the effect that “it may never make a profit”. Should an investor invest in such an enterprise? After all, why is someone investing in equity shares of a company? Well, the answer to the question depends on one’s approach to buying shares (please note that I have avoided the use of the word “invest” in the last sentence).
Someone buying shares could be investing in a business, or one may be investing in a stock, or one may simply be speculating on price appreciation only because someone else may be willing to buy the share at a higher price. The last one has.a name in the world of investing – it is called “the greater fool theory”. The theory says that the investor knows that one is buying a share at very high price, but is still hopeful that thee would be someone else, who would be willing to pay an even higher price for the same share later.
In my book “Riding The Roller Coaster”, I have discussed a couple of instances of investing in an IPO, even when thee was no rational explanation, but for the belief in the existence of a “greater fool”.
Read the book to understand how we think, and you should be able to look for potential slip up that are common to most investors.
The book is available in three languages. You may click on the language below to buy the particular language edition of the book.
Note: This is not a review of Uber IPO. I have not even read the documents the company has filed with the SEC. I am a happy customer of Uber.