Here’s Why The Upwork IPO Was a Real Snoozer After an Initial Spike

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Oct 4, 2018
This article is part of a series called Opinion.

Upwork IPO’d today.

With Glassdoor bypassing the public markets for a big payday, a lot of industry attention turned toward the popular freelancing platform. After an initial spike around 50 percent above the pre-IPO price, however, the day was a real snoozer for the company trading on NASDAQ under the ticker UPWK. After pricing the stock at $23 on the open, the stock settled at $21.08 by the time the market closed.

Quite a few analysts were bullish on the stock around $12 per share, but the inflated valuation apparently became too much for many buyers to stomach. Today’s low volatility and lack of sellers may mean buyers are in for the long haul.

“Upwork is unprofitable, but there’s more reason to be optimistic about this IPO than many others we’ve looked at in the past,” wrote Deep Value analyst David Trainer for Seeking Alpha. “The company’s accelerating revenue growth and improving capital efficiency provide some reason to believe it could potentially justify its valuation.”

In addition to an inflated valuation, increased competition, and a overhyped gig economy were likely weighing down the stock. “Upwork faces competition to become the dominant platform for hiring freelancers,” wrote Trainer. “Notable competitors include fellow startup Fiverr — which gets superior reviews compared to Upwork from freelancers, based on Indeed reviews, and Microsoft’s LinkedIn ProFinder.

“As we’ve argued before, the gig economy is overhyped,” Trainer added. “A recent survey from the U.S. Bureau of Labor Statistics showed that just 1 percent of U.S. workers work through online platforms, and of those roughly 20 percent are in transportation for services like Uber. The number of online freelancers is simply not that large.”

Upwork Information
Upwork, By The Numbers

In a note to users highlighting the first day of trading, Upwork CEO Stephane Kasriel said the user experience would not change. Here’s a video he did with CNBC this week. He was also very optimistic regarding the company’s future.

“We’re excited to be changing the way work gets done,” wrote Kasriel. “We make it possible for businesses to find, hire, work with, and pay freelancers anywhere, anytime. But our mission is even greater. We want to create more economic opportunities so people have better lives. I believe being a public company will help us increase our impact.”

For the company to thrive long term, it’ll have to move beyond low-cost, low-skilled workers. To help remedy that challenge, the company is attempting to move deeper into the enterprise market. Upwork touts companies like Microsoft, Dropbox, AirBnB, and GE as current customers. Here’s a video with GoDaddy.

I don’t own shares in the company, and I don’t intend to buy any in the foreseeable future. However, I am bullish on its long-term success. If for no other reason, low unemployment rates, and widespread prosperity won’t last forever. When layoffs occur — and they will — services like Upwork should be there as a viable option to make a living. The question is whether or not workers go back to the corporate grind when the economy bounces back.

This article is part of a series called Opinion.
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