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Should You Invest In Uber IPO?

IndianMoney.com Research Team | Posted On Wednesday, April 10,2019, 02:27 PM

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Should You Invest In Uber IPO?

 

 

Uber the ride-hailing giant seeks $10 Billion for the year’s biggest IPO. Uber is one of the greatest inventions of recent times. If you are stuck at a deserted place late at night in a metro city like Mumbai or Delhi, just book an Uber and you’re home in minutes. You would soon get to look at hundreds of pages of detailed information on Uber Technologies Inc as soon as Thursday.

Uber would kick off a road show to market its shares to potential investors as early as this month. Uber shares would be publicly trading in May. Uber IPO is the largest US IPO of the year and also the 10th largest of all time. As Uber files its IPO with US SEC (Securities and Exchange Commission), you and several crore investors will get a look at the numbers and operations.

Lyft another ride hailing app in the US, is giving a tough fight to Uber. Uber and Lyft compete heavily with each other by undercutting prices, with an aim to lure customers and make more profits. Many people in the US consider Lyft to be the younger brother of Uber. Lyft had even beaten Uber to an initial public offering.

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Should You Invest In Uber IPO?

Uber had generated $50 Billion in gross bookings in February 2018. This was an increase of 45% from 2017. However, many investors have a major concern. They believe Uber is stalling vis-a-vis its rival Lyft which operates in the US and Canada. Investors are concerned that Uber has saturated the US market.

Uber Valuation

Uber enjoyed a valuation of $76 Billion in 2018 after Toyota Motor Corp. made an investment. Bankers who are lead underwriters have said that Uber could be as valuable as $120 Billion. You will get details of the number of shares offered and the intended price range at a later filing.

Uber is a high growth Company. It pushes for growth over profit. Uber suffered losses of $1.8 Billion for 2018; this was down 15% from 2017. Lyft has been the main cause for Uber losses as both Companies fight a price war. Potential investors are not scared of Uber losses. Uber places itself as a world-changing disruptor.

Investors do have one concern. They want to know where Uber’s money is coming from as the ride-hailing business stalls. Uber is expanding into food and freight delivery, scooters and bicycles and is even eyeing driverless cars and flying vehicles. Uber operates in more than 70 countries.

Uber IPO is planned for NYSE (New York Stock Exchange) and is led by Morgan Stanley, Goldman Sachs and Bank of America Corp. Uber seeks a valuation of around $90 Billion to $100 Billion from its IPO. Most of the shares sold are issued by Uber.  A smaller portion would be owned by Uber investors cashing out.

Uber had gross revenues of $11.3 Billion in 2018. Sadly, Uber lost $3.3 Billion excluding gains from the sale of overseas units in Southeast Asia and Russia.

SEE ALSO:  How To Invest In IPO?

Uber’s IPO Roadshow

Uber’s CEO, Dara Khosrowshahi, has been given the task of convincing investors to invest in the Uber IPO. He has successfully changed the Uber culture after many embarrassing scandals in the last couple of years.

Uber faced sexual harassment allegations, massive data breaches which was even concealed from the regulator, allegations of bribery overseas, illicit software used to evade authorities and so on.

Both Uber and Lyft are launching IPOs in close proximity to each other. The appetite for ride-sharing investments will be severely tested, as both loss making Companies battle each other for drivers.

Uber will face the challenge of explaining and selling a business which is complex and less focused than its rival Lyft, in the IPO roadshow.

Investors in Uber

  • Wall Street’s biggest banks Goldman Sachs, Morgan Stanley and BlackRock have funded Uber over the last nine years.
  • Co-founders Travis Kalanick and Garrett Camp provided seed money.
  • Shawn ‘Jay Z’ Carter.
  • Jeff Bezos, the founder and CEO of Amazon.com.
  • Fidelity Investments
  • Softbank
  • Tencent
  • Axel Springer, the parent company of The Business Insider.

Should You Invest In Uber IPO?

  • Uber is a market disruptor which has done smart marketing to encourage sales growth.
  • Uber has a lot of funding right from start-ups, specialized funds and family offices. Some very wealthy people like the Saudi Royalty fund Uber.
  • Uber is the leader in the ride-hailing space.
  • Check the pricing before investing in IPO.

Things to beware:

  •  Uber has no economies of scale: As Uber grows its business it loses money.
  • Uber faces urban congestion in major US cities.

o  Ride hailing isn’t as economically as taxis.

o  Ride sharing has declined among the heaviest users.

SEE ALSO: Factors To Consider Before Investing In An IPO

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