Uber Technologies Inc. shares hit an all-time low Wednesday as the "lockup" period following its May initial public offering ended, delivering a blow to a company that has struggled to satisfy investors.
The expiration of the period sent a flood of shares onto the market, pushing the stock as low as $25.58, down 43% from its IPO price. While stock volatility and losses aren't unusual following lockup expirations, the loss of $2 billion from its market capitalization in 24 hours added injury to Uber after a lackluster earnings report this week.
Lockups prevent early shareholders and employees from selling shares in the first months after an initial public offering. Typically, the expiration of the lockup is highly anticipated, giving employees and early investors an opportunity to get cash for equity they have been sitting on. Uber priced the shares in its May IPO at $45, which gave it a valuation of $82 billion. Even before Wednesday's selloff, Uber's stock performance had disappointed investors.
Approximately 130 million shares traded hands on Wednesday, much more than the 65-day daily average of 11 million and higher than the typical trading volume at a lockup expiration, said Jay Ritter, a corporate finance and IPO expert at the University of Florida. It is unclear how many of those were shares sold for the first time due to expiration of the lockup.
A spokesman for Uber declined to comment.
Financial services firm Wedbush Securities estimates that 763 million shares became eligible for trading on Wednesday. Out of those, Wedbush estimates that 500 million to 520 million shares are underwater, as Uber held several private financing rounds since 2015 at a share price that was significantly higher than Wednesday's trading price. Daniel Ives of Wedbush said that 25%, or about 190 million, of the unlocked shares would be contenders to sell Wednesday.
The stock was already down more than 10% this week after Uber's third-quarter earnings report failed to reassure investors. Uber reported higher revenue and a narrower net loss. After the results, Chief Executive Dara Khosrowshahi said the company expects to turn a profit in 2021, on an adjusted basis excluding interest, taxes, depreciation and amortization. The timeline did little to raise investor enthusiasm.
The company's shares declined 3.8% Wednesday to close at $26.94.
Venture capital-backed companies on average see their stock price fall by 2% in the day before, day of and day after a lockup expiration, according to Mr. Ritter. Analysts and investors caution that the stock losses could continue.
"It is going to get worse from a cumulative standpoint," said Eric Schiffer, CEO of private-equity firm the Patriarch Organization, who is bracing for a 10% stock drop over the coming weeks. "And there's not a lot that is pushing this stock forward because investors are skeptical about their true path to profitability."
Ultimately, investor sentiment hinges not on one day of trading but on Uber's core business performance.
Long-term investors have reason to believe in Uber, said Mark Mahaney an analyst at RBC Capital. Uber's core ride-hailing business remains profitable before interest, taxes, depreciation and amortization, and its leading market share gives the company it an advantage when it comes to pricing power, he said.
"The ride-sharing business globally is a massive market, and it's increasingly clear to say the global leader in most markets is Uber," Mr. Mahaney said.
The lockup expiration "doesn't affect core fundamentals if Uber can continue to reduce overall losses and convince people that it can become profitable and maintain growth rates," he said.
Menlo Ventures investor Shawn Carolan, who led his firm's early investment in Uber, said Tuesday evening on Twitter that the firm would hold its shares after the lockup was lifted. "Eight years after our initial investment, we remain inspired," Mr. Carolan wrote, crediting the leadership of Mr. Khosrowshahi.
Menlo Ventures sold less than half of its Uber stake to SoftBank in a tender offer in late 2017, receiving slightly less than $1 billion through the sale.
Early Uber investor Lowercase Capital didn't sell shares or distribute shares to limited partners on Wednesday when the lockup expired, and has no immediate plans to do so, according to a person familiar with the matter.
Even companies with positive stock performance after their IPOs can struggle. Social media site Pinterest Inc. saw its shares slide almost 5% in October, the week the lockup ended, after initial post-IPO gains.
A stock slide after a lockup expiration doesn't necessarily spell long-term doom for a company, said Mr. Ritter. He studied the performance of 865 venture-backed companies that held IPOs in the U.S. from 2001 to 2017, and in the six months following their lockup expiration the stock price of those companies outperformed their public-market peers by 3.4%.
The price slump will also attract more mutual funds and hedge funds to the stock, which will allow the stock to stabilize, analysts said.
"Many are going to wait for the smoke to clear and once that happens it'll be all clear to buy," said Mr. Ives. "I think you are going to look back at this as a trough in the stock."
--Katie Roof and Sebastian Herrara contributed to this article.
Write to Heather Somerville at Heather.Somerville@wsj.com