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Comment by omarhaneef | Hacker News Reader

So I think people may be misinterpreting this drop:

lock up expired today, so the sales today -- throughout the day -- are a result of the lock up expiry.

This pre-market drop is the result of people anticipating the drop and selling before the market opens.

It is also, partly, driven by the disappointing earnings from 3 days ago, and indeed the drops over the last few days have been about as large.

For what its worth, shares are slightly up from the open.

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The post lockup sale was already "priced" into the share price a month ago (or even before). The market react only to NEW information.

In general, it is impossible to know what is priced in or not.

By your logic, it should have been priced in at IPO, since we knew back then that it would happen.

However, note that back then we also didn't know what else was going to happen. We didn't know if earnings would go up or down, or a lawsuit would emerge etc.

After earnings (a few days ago), we had a "purer" expression of the effect of the lockup expiry.

In other words, we had the information but there was also a lot of noise at IPO (or a month ago etc).

You are correct. Everything is priced in, alas, with probability of occurrence. If you look at option pricing the probablity is part of Black & Scholes formula.

Also, the market did not know about earning,this is a surprise information (or it should be).

I would also argue that the market priced in new information within milliseconds.

All timescales happen simultaneously on the market. So there is a slice of the market that’s priced how you say: IPO plus many years. There’s another slice that’s priced on the day’s expectations, another slice on the quarter, etc.

How big each slice is varies per company. But OP is correct that for all slices that contain yesterday, yesterday is priced in. Which includes all slices that were in the order book yesterday.

Some people did get out between IPO and yesterday, and they would not have priced yesterday at IPO.

All timescales do happen, however, the actual share price (the last trade) is decided by the very very short term order book, which is very sensitive to new information.

I will just point out what I see as a contradiction in these statements:

If getting out of the stock after the IPO and before the lockup expiry allows you to "escape" the effect of the lockup expiry, then you are implicitly saying that the expiry was not priced in.

I don't know what it means for a "slice" of the market to be priced a certain way. Uber has a clearing price which reflects all the opinions at any point in time. What is a slice?

Basically, sort all shareholders by planned sale date. Then you can slice them into “bins”. Let’s say we want nine $5B bins. They will each have a median planned sale date.

Made up example numbers:

$0-$5B of market cap: plan to sell within 24h

$5-$10B: plan to sell within 30d

$10-$15B: plan to sell at the end of the quarter

etc...

For any given future event, it will only be implicated for some of those slices. So the cost of an event will only affect that part of today’s order book.

I reckon that's generally true, but I'm trying to think through if it applies when composition of "the market" changes, e.g. when people that couldn't participate before (in lockup period) can participate now.

Is it still the case?

No, the market prices are not decided by a group of uber employees selling or buying.

In general, trading is done between hundreds of hedge funds, each with at least 10B in assets. Uber employee trading is meaningless.

What does the assets of the fund have to do with anything? If a bunch of new sellers are (literally) unleashed, what matters is how much depth there is on the bid side of the order book.

I'm surprised it isn't much lower. Maybe people holding the stock are too "pot-committed" to sell at this point?

I hate to be glib about valuations. There are a few people out there who have done the hard work:

http://aswathdamodaran.blogspot.com/2019/04/ubers-coming-out...

https://www.forbes.com/sites/greatspeculations/2018/02/22/br...

And Bloomberg had a good one, though I can't find it now.

I am not endorsing any of these, but the difference between a bull and bear (or, if you will, a valuation higher than what we have and lower than what we have) is probably how much you think additional business are worth.

So if you think that food delivery, logistics etc will amount to a large, valuable business, I think you are bullish.

Price targets from almost every analyst after Q3 earnings is $>40. If you believe that, you'd be making a mistake selling.

Do you have a link to these analyses?

https://www.tipranks.com/stocks/uber/price-target

Their "low" forecast is significantly higher than the current price. I'm skeptical.

Skepticism is entirely warranted, I was just pointing out that there seems to be some unanimity amongst analysts about undervaluation currently.

Slightly up from the open but still down majorly from yesterday. Are you in marketing?

The purpose of that distinction is to tease apart the effects of the lock up expiring from other effects (anticipation of the lockup expiry and after effects of the earnings call).

It is not to render some verdict on the one true value of Uber.

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