Uber IPO: What you need to know
Published 10-MAY-2019 13:05 P.M.
2 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Today is the day.
After much anticipation, Uber will debut on the New York Stock Exchange under the ticker ‘UBER’.
The listing is Dara Khosrowshahi’s crowning moment, whose mandate was to expedite go public plans upon joining the company as CEO in 2017.
Despite being oversubscribed, Uber has set its listing price at US$45 per share, which falls in the lower end of its stated range. At these numbers, the tech giant has an implied market valuation of around US$82 billion (fully diluted) – well short of its target valuation.
The company’s conservative approach is likely due to the performance of rival Lyft, which has endured a beating on the NYSE after reporting a $US1.1 billion loss for the quarter.
Having opened at US$72, Lyft closed at a record low of US$52.91 Wednesday night, a loss of almost 11%.
Morgan Stanley was the lead underwriter for the IPO, along with Goldman Sachs and Bank of America.
Uber will offer 180 million shares of its common stock at market open, which means it could raise a further US$8.1 billion on Friday.
While the listing is likely to be the largest tech IPO since 2014 (since Alibaba Group’s US$25 billion IPO), the ride-hailing pioneer is likely to be disappointed. Uber made no secret of its pursuit of a valuation in the US$120 billion range at around US$50 per share.
Unfortunately for Uber, it’s never turned a profit and it shows no sign of rectifying that soon. It lost $US3.04 billion last year alone, despite exceeding US$11 billion in revenue. In fact, according to filings, Uber has now lost over US$10 billion in the past three years.
Despite its reduced listing price, many remain unimpressed. Among those is Brian Hamilton, who is the founder of Sageworks.
Founded in 1998, Sageworks remains one of the most prominent risk analysis firms in the US.
“Uber is basically Lyft 2.0,” Hamilton said recently.
“Good model, growing sales. But, yet again, here comes California math once more. It is still losing a tonne of money.
“If you buy, you are buying a bull market, not a company.”
Leading tech investor Gene Munster is also sceptical, pointing to the disparity between Uber and Lyft’s valuations as a major concern.
“I was surprised at the pricing. The pricing at US$83-84 billion is going to be about 40% higher on revenue multiple versus where Lyft is trading on their 2020 numbers.
“I understand that there is some optionality value that might account for some of that 40% difference, but this seems to me just simply too wide of a gap.
“I’d recommend investors not play the IPO,” he urged.
How Uber fares in the long run remains to be seen, but there’s reason to be optimistic. Khosrowshahi has already made a concerted effort to reframe the organisation – arguing that Uber’s future is not in ride-hailing, but as an industry leader in logistics and wider transportation advancement.
In the short term, how Uber stacks up against Lyft on the open market will be of intense interest.
Let the race to profitability begin.
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.