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Uber Technologies Inc announced that they will seek to sell around $10 billion (£7.7 billion) worth of stock in its initial public offering, and will make public the registration of the offering on Thursday.
After Lyft’s catastrophic debut on the stock market, Uber will learn from its rival’s mistakes. Uber’s IPO will be more cautious, more realistic, and ultimately more successful.
EXCLUSIVE: Uber plans to sell around $10 billion worth of stock in its IPO, according to sources pic.twitter.com/YtEJS9GL0b
— Reuters (@Reuters) April 10, 2019
An IPO of this size would make Uber one of the biggest technology IPOs of all time, and the largest since that of Chinese e-commerce giant Alibaba Group Holding Ltd in 2014.
Uber is seeking a valuation of between $90 billion and $100 billion, influenced by the poor performance of smaller rival Lyft Inc’s shares following its IPO late last month. Investment bankers previously told Uber it could be worth as much as $120 billion, reports Reuters.
Uber most recently was valued at $76 billion in the private fundraising market. Analysts praised Lyft’s brave decision to launch its IPO ahead of Uber, at first. However, what happened was that Lyft shares hit the market at $72 but quickly fell below the launch price. Two weeks on and Lyft’s stock value sits 7 percent lower. Analysts lined up to slap bearish price targets on the stock, with Seaport Securities issuing an embarrassing $42 price target.
Lyft’s tumbling stock is a worrying sign for other unicorns. Shares have fallen as much as 21% since trading debut. Trading now below the raised IPO price of $72. Bad omen for Pinterest, Postmates, Slack, Uber which are hoping to ride a wave. https://t.co/jnhz05DU5S pic.twitter.com/I8deKHO8Db
— Holger Zschaepitz (@Schuldensuehner) April 1, 2019
Lyft’s poor stock performance bodes ill for these IPOs, especially for companies like Uber with no profits to show.
Brian Hamilton, founder of data firm Sageworks said:
“There’s no discernable way these companies are valued. What you’re really buying into is the long-term ability of the company to capture lots of sales and hopefully get profitable at some point. I’m sure that the Lyft debut is going to affect both Uber and Pinterest.”
Uber filed for its IPO in December with the U.S. Securities and Exchange Commission during the same week as Lyft. But it let Lyft go first with its offering, partly because it was working on a new private fundraising round for its autonomous driving unit.
Uber is now paying the price of going second. It is planning to seek a valuation between $90 billion and $100 billion, short of the $120 billion investment bankers previously told the company it could be worth in an IPO.
However, don’t forget that Uber will have full access to Lyft’s financials. Part of the IPO process is revealing complete financial documents. Uber can fully scrutinize its own financials against Lyft and pitch its IPO and value accordingly.
Different Approach to Expansion
How the company defines active users will be critical. Lyft counts each person who took “at least one ride on our multi-modal platform through the Lyft app during a quarter” for a total of 18.6 million active riders in the fourth quarter. With its more global and diversified business, Uber’s active user calculation could be more complicated.
The two companies have definitely taken different approaches to expansion.
Uber has invested in a suite of services, including freight shipping and meal deliveries. The latter, Uber Eats, is seen as a key growth driver for the company.
“Uber is not a one-note company. We’re a selection of different businesses, with different maturities and growth profiles.”
Lyft, by comparison, says it’s uninterested in these supplementary business lines.
Uber also invested real money and resources to expand across several continents, before selling off some of its regional businesses. Recently, however, it showed a continuing commitment to be a global brand with the $3.1 billion acquisition of Careem, a Middle East rival.
Lyft’s claim as an international company is more aspirational. The company currently only operates in the United States and Canada.
Don’t forget that, in a sign of how companies may be tempering their expectations, Pinterest, the image-sharing platform, lowered their expectations, setting a price range of $15-$17 for the 75m shares it plans to sell next week, setting up a potential “down round” with a valuation below its last private market fundraising.
Uber said in February that it generated $50 billion in gross bookings last year, up about 45% from 2017. But the figures show slowing growth. Of the $11.4 billion of net revenue in 2018, only $3 billion came in the last three months of the year, up only 2% from the previous quarter. While that number gave the San Francisco-based company a year-over-year quarterly growth rate of 25% — high by most standards — it fell well short of the 38% rate for the third quarter.