Uber’s IPO to Test Resolve Of Red-Hot Market: Cramer

The stock market has been on some kind of hot streak in recent days, but that is likely to face a stiff test when the company behind ride-sharing app Uber launches its initial public offering (IPO) next week.

The company is looking to go public even as drivers in major U.S. cities go on strike over working conditions. According to CNBC’s Jim Cramer, the Uber IPO will provide a market test following rallies elsewhere in the market.

Speaking on Friday, the “Mad Money” host said that investors need to be cautious and “worried” with regard to too much froth in the market. This refers to the untenably high share prices in the general stock market, but particularly within the IPO space.

Cramer noted that the offerings market was seeing massive interest and enthusiasm towards the purchase of stocks. As an example, he pointed to the second-day price rally that saw Beyond Meat’s stock skyrocket by 163 percent on Friday. The stock had made its market debut a day earlier on Thursday.

The market was like a “runaway freight train” at the moment and according to Cramer, periods of easy money never last. Could the Uber IPO provide the turning point?

Uber’s IPO is likely to be affected by the protests and a potential scenario that sees its drivers classified as employees as opposed to what the company terms as independent contractors. The company noted in its filing that business could suffer adversely if the former scenario unfolded.

Uber anticipates that its IPO will be priced on Thursday, May 9 and commence trading on Friday, May 10 on the New York Stock Exchange.

The company, which targets a market valuation of between $80.5 billion and $91.5 billion, is mired in this struggle with drivers alongside Lyft Inc.

As per its latest earnings report, Uber has not turned in any profits so far, with the first quarter 2019 results showing a net loss suffered yet again.

Uber has had tumultuous relationships not only with consumers but also regulators across multiple jurisdictions. Notably, the earnings results confirm that the company continues to lose money and will in the short term rely on venture capital.

And at the moment, as the IPO approaches, the key question would be whether the startup’s prospective investors have confidence that buying its stock provides a viable long-term investment opportunity.