Is the Uber IPO Debut Flop a Sign of Transportation Sector Weakness?

If Uber were in the dating business instead of the ridesharing business, then the majority of potential investors were swiping left during its initial public offering (IPO) debut last Friday. Its stock ended its first trading day with a 7.62 percent loss. On Monday, Uber lost a further 10.75 percent as U.S. markets experienced a widespread selloff, but Uber’s initial downfall could also be a sign of broader weakness in the transportation sector.

It doesn’t appear so at first glance when looking at transportation-focused exchange-traded funds like the SPDR S&P Transportation ETF (NYSEArca: XTN). XTN is up 18.57 percent year-to-date, outpacing the S&P 500’s 15 percent YTD gain.

XTN seeks to provide investment results that correspond generally to the total return performance of an index derived from the transportation segment of a U.S. total market composite index. The index represents the transportation segment of the S&P Total Market Index (“S&P TMI”).

Key features of XTN:

  • Seeks to provide exposure to the transportation segment of the S&P TMI, comprises the following sub-industries: Air Freight & Logistics, Airlines, Airport Services, Highways & Rail Tracks, Marine, Marine Ports & Services, Railroads, and Trucking
  • Seeks to track a modified equal weighted index which provides the potential for unconcentrated industry exposure across large, mid and small cap stocks
  • Allows investors to take strategic or tactical positions at a more targeted level than traditional sector based investing

Needless to say, XTN is faring far better than Uber thus far. The ridesharing company’s stock fell 6.7 percent after debuting with a price of $45 per share.

“Uber debut didn’t quite live up to the expectations, and that’s why some investors are selling,’’ said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “It’s too early to tell how sensitive SoftBank will be to Uber’s price moves going forward. But even if they fall some, that doesn’t have a direct impact on Vision Fund profits.”