Uber will reveals terms for its initial public offering today, revealing to investors that it will look to be valued at $80 to $90 billion, according to sources who are familiar with the subject. The desired valuation is lower than the $120 billion that investment bankers advised Uber that they would see last year, and more close to the $76 billion that it reached in its last round of private fundraising. Uber is saving a number shares to provide to some of its most productive top drivers, including drivers who have carried out 2,500 trips or more.
Uber’s reduction in valuation expectations echoes the weak stock performance of its smaller sized rival Lyft following its initial public offering last month. Shares of Lyft ended trading yesterday down 22% from their IPO rate among investor doubt over its journey to becoming profitable.
Uber is expected to announce an IPO price range of somewhere between $44 and $50 per share, based upon which Uber would raise between $8-$9 billion, according to sources. If this holds true, the IPO would rank as the largest since that of Alibaba in 2014. Additionally, some Uber share holders will sell off some their own shares in the initial public offering, the sources explained. Reuters had earlier reported that the combined valuation of Uber shares sold during the IPO could be valued at around $10 billion.
Uber further plans to announce its final sale of stock while being a private company. According to Reuters, PayPal Holdings Inc. is planning to invest $500 million in a private purchase at Uber’s IPO price. The arrangement consists of a partnership to extend PayPal as a settlement option for riders in the majority of the over seventy countries where Uber currently operates.
Additionally, Uber and PayPal plan to work together on digital payment options, which includes the development of an Uber digital wallet which customers could use to pay for the purchase of rides for those other than themselves. The creation of a more powerful digital payments program could boost Uber’s aspirations to become an application which could be used for a wide range of logistics and transportation services. It could also provide the company with additional opportunities in under-banked locations. PayPal’s investment and the joint venture are dependent on Uber completing its initial public offering.
The upcoming investor roadshow will get into full swing on Monday, laying the groundwork for Uber to make its debut on the New York Stock Exchange sometime in early May. Uber’s top executives will be traveling the Unites States and will stop off in London to attempt to attract investor interest in the IPO, according to unnamed sources. However, Uber declined to make any comment. The reported price range was documented previously by Bloomberg.
There have been two other IPOs this month, including Pinterest and Zoom Video Communications Inc. Both have performed far better than Lyft. Even so, Uber has decided to be conservative and still value itself. The company has revealed that it has as many as 91 million users worldwide, but growth is slowing down and it’s possible that it may never be profitable. In 2018 Uber posted $11.3 billion in total revenue, up close to 42% over 2017, but lower than the 106% growth in 2016.
During the roadshow, Uber chief executive, Dara Khosrowshahi, will need to convince investors that he has effectively improved Uber’s culture and business procedures after a sequence of disturbing scandals over the past two years. Those include sexual harassment accusations, a wide-scale data breach that was hidden from regulators, use of dubious software to avert authorities and accusations of bribery abroad.
A week ago, Uber’s independent vehicle unit privately raised $1 billion from a pool of investors, which included top shareholder SoftBank Group Corporation, allowing for the transfer of some of the considerable cost of developing self-driving vehicles onto exterior investors and placate some Wall Street worries over spending.
One benefit Uber will possibly seek to highlight to investors is the fact that it is the largest ride-hailing company in most of the markets in which it offers services. Most analysts consider growth and scaling essential for Uber’s business model to turn out to be profitable. Competetor Lyft, which had a valuation of $24.3 billion in its IPO, only offers services in the United States and Canadian markets. What investors are now asking for is more clarity on exactly how these types of ride-sharing companies will generate income from the data they are gathering and if the business is in fact scalable.