Uber, the ride-hailing start-up, plans to kick off with its IPO in April 2019. This is the moment markets have been waiting for and it is almost here.
The Uber IPO has the potential to become a blockbuster. This is the biggest public offering that the market has seen and could provide a great opportunity for investors and traders.
Exceeds previous evaluation
According to reports which have already been confirmed by JP Morgan and Goldman Sachs, after Uber announced their IPO, the company was valued at 120 billion dollars which exceeds the previous evaluation by 50 billion dollars.
By JP Morgan and Goldman Sachs estimates, this could surpass other IPO’s such as Google who in 2004 IPO was valued at 23 billion and also Facebook whose IPO was 104 billion dollars in 2012.
Today, Uber has a well-established brand name of ridesharing in the industry and has huge potential for further growth. With 60% of the market share in the U.S., the ridesharing is only a part of their other ventures and foresee their drivers playing less of a role in the future.
Uber branches out
13% of the sales in the third quarter of 2018 for the company came from Uber Eats, its food delivery service.
They are also offering bike and scooter options called New Mobility and Uber Health that assists health care agencies to arrange rides for patients.
They are looking into a ride-hailing service for corporations which will allow the companies to make bookings for employees even if they don’t have the Uber app.
That’s not all…
Keeping with the mobility theme, they are looking to the shipping industry with a program called Uber Freight which will connect carriers with appropriate shipments on their platform.
With a touch of a button, carriers will have the ability to book a shipment and see appropriate shipments, all with transparent pricing.
Ahead of their IPO on Friday, Uber Technologies Inc. gave investors a look at how big the offering may be after updating its IPO prospectus.
• IPO under the ticker “UBER” to be listed on the New York Stock Exchange.
• A price range of between $44 to $50 a share.
• 1,676,959,021 share outstanding after the IPO excluding options, restricted stock units and warrants.
• Value of the company is (at the high end) $83.85 billion.
Already, Uber has bagged big-name investors:
• PayPal to invest at the IPO price $500 million
• Softbank Vision Fund, Toyota Motor Corp & Denso have pledged to invest together $1 billion in Uber’s newly formed entity autonomous-driving
What to look out for ahead of the IPO
Uber’s prospectus has more than 290 pages of information and commentary before the financial appendix details. This promises to have investor’s hands full as they endeavor to evaluate and scrutinize the company’s business outlook.
As there are many different areas that Uber are engaged in, their financial results will span many layers as well as uncommon metrics.
For instance, it will give the overall revenue including a number for ‘core platform adjusted revenue’ which consists of its ride-sharing and Uber Eats, primarily.
It does not include things like driver incentives or referrals.
In 2018, Uber’s revenue rose to $11.3 billion from $7.9 billion in 2017 resulting by an increase of 43%.
However, in 2017, their revenue more than doubled which indicates that the growth rate is slowing considerably. Similar trends are for the core platform as well.
The newer ventures will be classified under ‘Other Bets” so that investors will have a better understanding of how the businesses are doing. This would be Uber Freight and New Mobility (bikes and scooters).
Revenue in “Other Bets” climbed from $67 million to $373 million in 2018 attributed to growth in Uber Freight. Uber expects the company to have losses in Other Bets in the near future as they invest in autonomous driving.
With more red ink on the balance sheet, last year Uber sold their operations in China, Russia and Southeast Asia and reported a $1 billion net income because of it.
However, they reported an operating loss of $3 billion which they attributed to drivers taking home more than Uber because of incentives.
Worsening relationship with drivers
Uber’s relationship with its drivers isn’t great and they predict that it will worsen with dissatisfaction among their drivers increasing as they push to improve their bottom line by reducing incentives.
Drivers will be paid for completing a specific number of trips within certain timeframes.
Also, there is the possibility of Uber being forced to have drivers as employees rather than contractors which would impact on their financials.
Included in the prospectus is tipping data which was introduced in mid-2017 with drivers earning $1.2 billion through the end of 2017.
Autonomous cars vs drivers
The future role of autonomous cars could also impact the need for drivers but Uber believes that during situations involving complex routes, unusual weather conditions and high-demand events (sporting, concerts, etc.), there will be a need for drivers.
In its mission statement for its prospect, Uber CEO Dara Khosrowshahi declared that they are a once-in-a-generation company that is not even one percent done with their work.
Major potential growth and Uber’s well-established brand in the industry of ride-sharing could make them one of the top initial public offerings by far.
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