- PayPal got in late having bought over 10 million shares of Uber at $45
- Some analysts are expecting a ‘horror show’ after the stock lock-up period expires.
- Uber’s stock hit a record low on Tuesday a day ahead of the expiry of the lock-up period
Payments firm PayPal (NASDAQ: PYPL) was one of the biggest investors in Uber Technologies (NYSE: UBER) ahead of the IPO. In its prospectus, Uber noted that PayPal had agreed to buy 11,111,112 of its common stock at a price of $45 per share. This cost PayPal slightly over half a billion dollars.
After Uber plunged by nearly 10% Tuesday to $28.02 per share following a quarterly loss of over one billion dollars, PayPal’s stake in the ride-hailing firm is now worth $311,333,358. This translates to paper losses of approximately $188,888,904.
The Tuesday plunge also marked a new record low for the stock. The previous low was $28.31 registered in early October.
Uber stock price chart | Source: Yahoo Finance
Will PayPal’s investment ride get bumpier?
In the third-quarter earnings call with analysts, PayPal CFO John Rainey noted that strategic investments in Uber investment (and ecommerce giant MercadoLibre) had ‘created more earnings volatility. Notably, the Q3 results released last month showed that the strategic investments had caused PayPal unrealized losses of $0.18 per share during the quarter.
PayPal’s unrealized losses in Uber | Source: PayPal
At the time, Uber’s stock had declined the most – 34% compared to MercadoLibre’s 10% fall.
Now the pain is likely to get worse for PayPal as the six-month lock-up period expires today (November 6th). A flood of shares from employees, founders and venture capitalists could hit the market pressuring the stock even further.