Ride sharing giant Uber made its IPO filing public yesterday. The company that plans to list on the NYSE under the ticker UBER, may seek a valuation of about $100 billion versus earlier expectations of about $120 billion. This would still be the biggest IPO since Alibaba’s (BABA - Free Report) $169 billion listing in 2014.
Last year, Uber had revenue of $11.27 billion and an adjusted EBITDA loss of $1.85 billion. The filing also revealed that the company’s growth was beginning to slow.
Meanwhile, Lyft (LYFT) continues to struggle and is now trading close to $61—down 15% from its IPO price of $72. Lyft’s trading debacle could have been instrumental in bringing Uber’s IPO pricing down.
Remember, not all IPOs are successful. Investing in smaller, rather unknown companies can be quite risky. While a handful of these fledgling companies may turn out to be excellent investments, some may result in big losses. Further, trading is usually volatile in the first few months of trading as analysts and investors learn more about newly public companies.
An ETF approach can largely reduce the risks, while offering the opportunity to participate in the gains of a diversified group of larger, more liquid IPOs.
IPO ETFs provide exposure to newly public companies before they join other core US equity indexes. Most broad market indexes include newly public companies only after a ‘seasoning’ period—i.e. after they have been trading for some time. For example, Google-Alphabet (GOOGL - Free Report) and Facebook (FB - Free Report) were included in the S&P 500 index about two years after going public.
To learn more about the First Trust US Equity Opportunities ETF (FPX - Free Report) and the Renaissance IPO ETF (IPO - Free Report) ETF, please watch the short video above.
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