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In what will end up being the largest company to go public this year and possibly for quite some time, the world's largest ride-hailing company Uber has priced its IPO at $45 per share according to the Wall Street Journal.
The company has been telling investors to expect a range of $44 to 50 a share, and Uber has gone with a lower price on that spectrum. At $45 a share the company will be worth around $82 billion making it one of the highest valued IPOs ever. This week many analysts were calling for $2 to $5 billion dollars more than this, but Uber stated in their S-1 filing that pricing appropriately is "just good business".
Uber, which will trade under the obvious ticker 'UBER', will raise some $8 billion in cash from the offering that it will use to further deploy its worldwide network of ride hailing services. While this is still a very big IPO, Uber was seeking as much as 50 percent more - around $120 billion as recently as a late last year.
Uber to go public amid controversy and uncertain markets
Unfortunately for Uber there are some clouds hanging over it right as it is entering one of its most critical moments ever. Drivers are currently striking in large numbers, prompting a shortage of drivers and driving some fairly negative press across media outlets. Strike organizers have stated that unfair wage depreciation and unfavorable terms have prompted the strike, so nothing new here historically. They probably have a point, too. Consider that in 2013 a driver would take a fare - on average - around two miles to make $10. Contrast that with 2019 - a driver has to go nearly five miles to make the same amount of money. That's a 2.5x increase in miles driven for the same fare!
However, that is the lesser of Uber's woes. By far the bigger issue is Lyft's abysmal showing on the stock market since it went public about six weeks ago. We just covered yesterday that Lyft has tumbled to a new all-time low, down over 30 percent from its IPO. To its credit prices clawed back around 4 percent today, but the fact remains that Lyft has lost a quarter of its value, around $5 billion in a little over a month.
And its that story that is going to cause some serious confidence issues with investors. Uber, much like Lyft, has managed some impressive growth over the last few years - but also like Lyft, Uber has never turned a profit. Well, never turned a profit if you forget about the first quarter in 2018 where Uber sold off its Southeast Asia unit to Grab for around $3 billion. That doesn't count.
In 2018 Uber lost over $2 billion dollars, and its cumulative losses are pretty staggering. Uber's losses exceed $12 billion. Its facing renewed competition from Lyft who is now somewhat flush with cash from the money its raised from its recent IPO.
Lastly, let's not forget one final element hanging over Uber's head. Perhaps the world's most ambitious billionaire, Mr. Elon Musk, just this week announced Tesla was going to bet its life on autonomous taxi service. While Tesla has struggled mightily of late, the company has some major resources and serious tech that poses a real world threat to Uber. Uber definitely has the cards stacked against it as it finally heads into the final days ahead of its IPO.
Uber is a mega-unicorn, a once small tech startup now worth possibly $80 billion dollars. Excitement, despite all the factors listed above, will remain high as the company goes public tomorrow. However as Finance Editor Adrian Ip pointed out, tech stocks may be overcooked. Investors be warned.