Uber IPO Still in the Cards, But Perhaps at the Low End of Valuations
Uber Technologies Inc. has possibly one of the most hyped initial public offerings (IPOs) ever. Some are putting valuations of the company past $69.0 billion (others are more reserved, pegging it at a mere $30.0 billion). (Source: “An Expert in Valuation Says Uber Is Only Worth $28 Billion, Not $62.5 Billion,” Bloomberg, August 17, 2016.)
If and when Uber stock does go public, the Uber IPO would almost certainly be the IPO of that year, if not the biggest stock market event of the year. But there’s more to the tale of Uber stock, and that’s revenue.
In the first nine months of 2016, the company lost significantly more than $2.2 billion. In the third quarter alone, Uber lost more than $800.0 million, and that does not include its Chinese operation. Uber exited the Chinese market in August. (Source: “Uber’s Loss Exceeds $800 Million in Third Quarter on $1.7 Billion in Net Revenue,” Bloomberg, December 19, 2016.)
But the loss is offset by the money that the company is raking in. Uber generated about $3.76 billion in net revenue in the first nine months of 2016, and is on track to exceed $5.5 billion by the end of the year. The company has also experienced slow growth, partly due to exiting China, the world’s most populous country. Uber struck a deal with Didi Chuxing to leave the market in exchange for 17.5% of the Chinese company. Didi then invested $1.0 billion in Uber as a result of the deal.
Net revenue is looking good for Uber; the company generated $1.7 billion in the third quarter, growing from $1.1 billion in the second quarter and $960.0 million in Q1. Of course, being a private company means that all these numbers have become public as a result of a leak, and therefore are not registered.
Uber continues to lose money in the U.S., albeit at a slower pace, while a competitor like Lyft, Inc. has promised investors to keep losses of $150.0 million a quarter.
Which brings us back to: just what we can expect when Uber stock does go public? Will the losses ward off some investors, or will the sky-high valuations hold?