30 Jun Morris Esformes Discusses Uber’s New IPO Plan Compared to Lyft and Its Current Performance
Uber Technologies Inc., a multinational transportation network company (TNC), which has brought direct transportation to cities around the globe, rolled out its first Initial Public Offering (IPO) plan just 10 years after its founding.
The Numbers Behind Uber
The direct transportation service, which allows customers to call a vehicle from the convenience of an app on their phone with a service quota, is estimated to have 110 million users worldwide and a 69% market share in the United States for direct transportation. After launching Uber Eats, a food delivery service, the company is also estimated to have an additional 25% market share within the food delivery space.
After information was leaked regarding an IPO plan earlier this year, it was reported that the transportation company intended to set a price range that would value the company at an estimated $90 billion. The company’s shares for investors would be set at $44 to $50 per share placing the value between the $80 and $90 billion mark. While the company would fall just under the $100 billion mark, it would be above the appraised $76 billion.
Lyft, in a Nutshell
Competitor Lyft, which also rolled out an IPO plan earlier this year, has been selling its shares below offering price, which caused complications for Uber when pitching itself to investors. Lyft was the first direct transportation service to go public, setting the precedent for all direct transportation companies, and investors closely watched its first couple months to determine future valuation of the business model and stocks. Lyft’s stock valuation was originally estimated at $24 billion, but quickly dropped to $16.1 billion after investors witnessed a lack of appetite amongst consumers.
Due to Lyft’s troublesome start, Uber was pressured into being more strategic and conservative in its IPO to avoid falling below its price point.
While Uber has proven to be a disruptor within the transportation industry and has given taxi services a run for their money, it still has a long way to go in proving it’s both a disruptor and a profitable business, according to investors.
Uber’s Financial Situation
In 2018, Uber lost $1.8 billion, which was recorded in a regulatory filing. However, the company, which has expanded into food delivery services and freight transportation, has noted that its secondary businesses have already surpassed its core cab hailing business. So, where does the money go? One of Uber’s long-term goals is production of a self-driving car, which would eliminate the need for its drivers altogether. During 2018 the company spent over $457 million on development of the autonomous car and more recently received $1 billion in funding from SoftBank and Toyota.
Although the company’s valuation was only $90 billion, it was still one of the largest companies to go public in the past 10 years, placing in third following Facebook’s 2012 IPO valued at $104 billion and Alibaba in 2014 valued at $167 billion.
Now, with the roll out of its highly-anticipated IPO, the company has been underperforming in the stock market, a concerning factor for investors and for a company of its magnitude. According to data from Dealogic, Uber’s IPO was the fifth weakest one-day return of a company with a value of at least $10 billion in over 24 years.
Uber’s IPO on the New York Stock Exchange has also been considered inopportune timing by some, as its release came with heightened tariff tensions between China and the current administration. Uber CEO Dara Khosrowshahi told the Wall Street Journal that the company expected a “volatile day” in the market ahead of the roll out.
In just hours after the release of its IPO, Uber’s shares dropped from $45 to $41 and its valuation settled at half of what was expected. While the company hasn’t fully recovered from its initial stock market woes its stock has slowly increased since the May roll out.
Uber, which was once an investor darling, has somewhat fallen from its pedestal, but investors say now is the time for the company to showcase what it intends for the future.