U Power, UCAR, IPO fails terribly as shares soar 619% on day one

U Power (NASDAQ: UCAR) shares are up 619% in the first day after the IPO. It rose as much as 1,150% over the day and then eased off over the course of the day. There was a further drop in the postal market of another approximately 22%. Such a price development in a recent IPO is often taken as a sign of success. It’s not that, it’s a terrible failure. The investment bankers who advised on pricing mistakenly became incompetent. Things like that just shouldn’t happen.

U Power is another Chinese company planning a US IPO. Since a Chinese company cannot do this directly, it works through a complex of derivatives deposited with a Cayman Islands company. Whether this really and truly works in times of need is not really known yet. But it’s a common technique and too many want a slice of Chinese action, so it’s working for now. The line of business appears to be developing battery swapping technology for electric vehicles. Whether that will ever happen is unknown – hey, that’s all venture capital, right?

U Power share price from NASDAQ

We admit that we have significant doubts that the basic idea even works, let alone the technology. Batteries degrade over time and the idea of ​​popping in to add a random one to your vehicle strikes us as an idea that just won’t work in this real world. But who knows that we don’t understand it is not dispositive. There are many things that we don’t see the point of and that work well.

However, we really have to insist that U Power’s IPO was a failure. The whole point of the process isn’t to please us as investors out here. It’s supposed to raise money for UCAR by selling part of the business out here to us. The higher the price of U Power – the higher the IPO price – the better for UCAR. You get more money for a smaller percentage of the business that’s gone. A 600% surge — or 1,150% — immediately after the IPO shows they could have sold their shares at more than $6. They could have gotten more money. The bigger the bang on IPO day, the worse the IPO. Your bankers should be ashamed.