Uber’s journey as public company off to slow start

After a decade as one of the hottest privately financed companies in the world, raising money at ever-escalating values, Uber’s IPO price is something of a comedown.
After a decade as one of the hottest privately financed companies in the world, raising money at ever-escalating values, Uber’s IPO price is something of a comedown.Jeenah Moon/New York Times/File 2019

Uber Technologies’ journey as a public company got off to a slow start.

The ride-hailing giant on Thursday priced its highly anticipated initial public offering at $45 a share, near the bottom of its target range of $44 to $50 apiece.

The conservative price may have been needed to attract investors following a 23 percent decline in the shares of rival Lyft since it went public six weeks ago. Uber and its bankers may also want to ensure the stock has a nice “pop” when it begins trading Friday.

After a decade of Uber being one of the hottest privately financed companies in the world, raising nearly $20 billion at ever-escalating values, the IPO price is something of a comedown. But Uber is going public at a difficult time for the stock market, which has been roiled by a flareup in US-China trade tensions.


Uber will hit the market with a value of $82 billion, down from earlier estimates of $90 billion to $100 billion but still delivering billions of dollars in paper profits for its founders and early investors, even as the company remains awash in red ink. Uber raised $8.1 billion, the largest US tech IPO since the Chinese e-commerce behemoth Alibaba brought in $22 billion in 2014. Facebook raised $16 billion in 2012.

While San Francisco-based Uber is much larger and more diversified than crosstown rival Lyft, both face the same existential question: Is it possible to make a profit matching independent drivers with cellphone-wielding consumers looking for a ride?

“This is an unattractive and unprofitable industry,” said Peter Cohan, who teaches entrepreneurship and strategy at Babson College, citing abundant competition and intense pressure on pricing. “Is there a strategy to make it profitable? No.”

Earlier this week, Lyft reported an operating loss of $211.5 million in the first quarter, compared with $228.4 million a year earlier, as revenue climbed 95 percent to $776 million.


Brian Roberts, Lyft’s chief financial officer, said 2019 would be “our peak loss year, and then we will move steadily toward profitability.”

In a regulatory filing, Uber put its first-quarter adjusted loss at $1 billion to $1.11 billion, compared with a loss of about $890 million in the fourth quarter. Revenue of $3.04 billion to $3.1 billion was about 5 percent higher, representing a worrying slowdown from much headier rates of growth last year.

Uber is pitching itself as far more than a taxi-killer. Its Uber Eats food-delivery service is growing quickly, and the company has gotten into bikes, scooters, freight trucking, and autonomous vehicles.

Some investors who are bullish on Uber’s future have drawn an analogy to Amazon, which lost money early on as a bookseller but came to dominate Internet retailing. Amazon, however, was solidly in the black by its 10th year, and its biggest profit generator now is its cloud computing business.

How Uber performs once it starts trading could set the tenor for other tech IPOs in the pipeline. They include offerings by Slack, a so-called direct listing that could value the messaging software company at more than $15 billion, and WeWork, the co-working real estate landlord, which has a private valuation of $45 billion, according to Renaissance Capital, a manager of IPO-focused exchange-traded funds. Airbnb, the short-term residential rental company, valued at about $35 billion, may file to go public later this year.


Some of Uber’s biggest investors are selling small fractions of their stakes in the IPO. They include cofounders Travis Kalanick, who holds 8.6 percent of the company on a pre-IPO basis, and Garrett Camp, with 6 percent. SoftBank’s Vision Fund, Uber’s biggest investor, with a 16.3 percent stake, is also selling some shares.

The second-largest investor in the company, Benchmark Capital, sold shares previously and holds an 11 percent interest. Saudi Arabia’s Public Investment Fund and Google parent Alphabet each own just over 5 percent.

In conjunction with the IPO, qualified Uber drivers will get cash bonuses of $2,500 to $10,000, based primarily on the number of trips driven. They will also will have the option to buy a limited number of shares in the IPO.

So what happens next? Uber’s shares will trade on the New York Stock Exchange under the symbol UBER. Regular NYSE trading starts at 9:30 a.m. It will probably take a couple of hours for buyers and sellers to agree on a price so Uber shares can begin changing hands.

You can reach me at larry.edelman@globe.com and follow me on Twitter @GlobeNewsEd.If you don’t already get my Talking Points AM newsletter, you can sign up here.