Uber raises $8.1bn in IPO priced near bottom of range

The firm will start trading publicly on New York Stock Exchange from today

Uber lost over $3bn last year on an operating basis on revenue of $11.3bn. Reuters
Uber lost over $3bn last year on an operating basis on revenue of $11.3bn. Reuters

Ride-hailing company Uber raised $8.1 billion in its initial public offering after pricing shares near the bottom of their marketed range. It will start trading publicly on New York Stock Exchange on Friday.

The firm sold 180 million shares for $45 each, according to a statement. Uber had marketed them for $44 to $50 apiece.

Based on the amount of stock outstanding after the offering, the IPO price gives San Francisco-based Uber a market value of $75.5bn, just below its last private market value of $76bn. The fully diluted value, including restricted stock units and other shares, could be about $82bn.

Uber has prioritised selecting shareholders - particularly institutional investors - that it thinks will hold on to the stock for a long time, according to a person familiar with the matter. The company is hoping to avoid the tumultuous first weeks of trading in rival Lyft, whose shares fell below its $72 IPO price within days of listing and closed 23 per cent below that price on Thursday.

“We view Uber’s conservative pricing as a smart and prudent strategy coming out of the box as it clearly learned from its ‘little brother’ Lyft, and the experience it has gone through over the past month,” Wedbush Securities analyst Dan Ives said.

Even at the low end of the price range, Uber’s listing is set to be among the 10 largest US IPOs of all time and the biggest on a US exchange since Alibaba Group’s $25bn global record holder in 2014, according to data compiled by Bloomberg.

Still, it is a considerable climb down from earlier projections. Last year, bankers jockeying to lead the offering told Uber it could be valued at as much as $120bn in an IPO.

That is partly because, after waiting a decade to go public, the most highly valued startup in the US is set to make its market debut amid less-than-ideal conditions. US stocks fell for a fourth day on Thursday, leaving the S&P 500 index on pace for its worst week of the year as trade tensions escalated between the US and China.

The pricing - and subsequent trading performance - will be closely watched by the cavalcade of other tech startups that are expected to go public this year, including Slack Technologies, Postmates, Peloton Interactive and Airbnb.

Arun Sundararajan, a professor at New York University’s business school, said that while going public will give Uber money to capture more of the transportation market, it could also push it to put quarterly targets ahead of its broader ambitions.

“The trillion dollar valuation will come if they can spend the next five to 10 years getting to that place where more is spent on Uber than on any other form of transportation,” Mr Sundararajan said. “The trouble is that’s going to require keeping investors at bay who are putting pressure on Uber to deliver earnings.”

“The freedom to play the long game gets significantly reduced when you go public even when the resources to do so are increased,” he said.

Uber lost $3.04bn last year on an operating basis, on revenue of $11.3bn, bringing total operating losses over the past three years to more than $10bn, according to filings. Its drivers in London and New York went on a day of strikes on Wednesday to protest the disparity between gig-economy conditions and the sums that investors are likely to make in Friday's blockbuster stock market debut.

Published: May 10, 2019 10:51 AM


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