What Are the Chances of an Uber IPO in 2017?

Uber-StockWill Uber IPO in 2017?

When it comes to public relations, you really can’t do much worse than Uber Technologies Inc. The Uber valuation, ahead of its eventual initial public offering (IPO), now sits at a monstrous $66.0 billion, while the Uber IPO date is still very much in the air.

But, even with all the gaudy numbers and accompanying IPO excitement, all Uber can ever seem to do in the public’s eye is, well, mess up. People should be wondering “Will Uber IPO in 2017?” not “Jeez, what did Uber do wrong now?

Before we get into the particulars of the potential Uber IPO 2017, lets recap some of the colossal and calamitous missteps that the company has made on the public relations front, and why that could be important in the run-up to a public offering. (Source: “As Uber Melts Down, Its CEO Says He ‘Must Fundamentally Change‘,” The Atlantic, March 1, 2017.)

The most recent flub comes courtesy of Uber CEO Travis Kalanick, tech’s bad-boy executive.

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Kalanick was recently lambasted for cursing at Uber driver Fawzi Kamel, who was criticizing Uber’s lowering of fares, all of which was caught on camera. “People are not trusting you anymore,” Kamel tells Kalanick. “I’m bankrupt because of you… You changed the whole business. You dropped the prices.”

Kalanick replies by repeatedly saying “bullshit” before yelling and exiting the car with a slam of the door. This most recent controversy, following a string of bad PR moves by the company of late, prompted an uncharacteristic apology from Kalanick.

“By now I’m sure you’ve seen the video where I treated an Uber driver disrespectfully,” said the CEO in his message to Uber employees. “To say that I am ashamed is an extreme understatement. My job as your leader is to lead … and that starts with behaving in a way that makes us all proud. That is not what I did, and it cannot be explained away.”

It’s not exactly a good ramp-up to entering the public market when your CEO says he needs to “fundamentally change as a leader and grow up.”

And that’s just the tip of the iceberg.

Another huge threat to the Uber IPO comes from Google, which is part of Alphabet Inc (NASDAQ:GOOG). “Waymo,” Google’s self-driving car division, filed a lawsuit against Uber alleging that the ride-sharing company stole 14,000 proprietary technical files via Anthony Levandowski, a former Google engineer.

Levandowski went on to found a self-driving truck startup called Otto, which was acquired by Uber last summer. Levandowski then became head of Uber’s autonomous vehicle efforts. (Source: “Google’s Robocar Lawsuit Could Kill Uber’s Future and Send Execs to Prison,” Wired, February 28, 2017.)

The lawsuit is broad, far-reaching, and could have all sorts of debilitating effects on Uber if it does edge in Google’s favor. Waymo currently claims that Uber made about $500.0 million off of the stolen ideas, a figure derived from the reported acquisition price of Otto Motors.

Beyond the monetary value, which could well exceed $500.0 million when all is said and done, Google could ask the court for an immediate, temporary injunction, shutting down Uber’s autonomous vehicle research as the case proceeds. That, naturally, would be devastating. Google could also potentially seize products of its trade secrets, even before the case is decided.

Again, devastation for Uber.

“What would happen if we weren’t a part of that future?” asked Travis Kalanick in a 2016 interview about autonomous cars. “If we weren’t part of the autonomy thing? Then the future passes us by basically, in a very expeditious and efficient way.” (Source: “Travis Kalanick on Uber’s bet on self-driving cars: ‘I can’t be wrong’,” Business Insider, August 18, 2016.)

Basically, that’s what Uber could be facing if it faces the worst-case scenario as a result of these legal proceedings.

What’s even stranger is that not too long ago in 2013, Google and Uber were looking like they were going to march hand-in-hand into the autonomous car future as allies, not mortal enemies. Google invested $258.0 million in Uber back in 2013; quite a departure from their current relationship. (Source: “The inside story of the rise and rise of Uber,” TechCrunch, February 7, 2017.)

So you have a pretty-much universally-disliked CEO in Travis Kalanick coupled with a rival tech titan potentially able to cripple the future of your business; not exactly the best environment for a company to go public in.

And then there was the very popular #DeleteUber movement that came about after the company eliminated price surges during the taxi strike at JFK Airport aimed at protesting the U.S. government’s newly instituted travel bans.

All told, 200,000 customers reportedly left Uber behind, while competitor Lyft, Inc. shot up to the top of the app download charts as it promised to donate $1.0 million dollars to the American Civil Liberties Union (ACLU). (Source: “Here’s How Many People Deleted Their Uber Accounts,Esquire, February 2, 2017.)

And that goes without mentioning all the various sexual harassment complaints and otherwise-hostile work environment allegations levied by former Uber workers. One executive has even been asked to step down, while a widely circulated blog post has done some pretty hefty damage to Uber’s reputation in the public eye. (Source: “Uber asks exec to resign for not disclosing sexual harassment allegation,” Reuters, February 27, 2017.)

So, will Uber be the hottest IPO of 2017? Hard to say. But there’s definitely a whole lot of ill will aimed at the company right now, which may make management think twice before hitting the open markets.

Should You Buy Uber Stock? 

uberdrivers

(Source: “An Analysis of the Labor Market for Uber’s Driver-Partners in the
United States
,” Amazon Web Services, last accessed March 3, 2017.)

So we’ve covered some of the controversies that may impact the ride-share company’s decision to go public in 2017. And there’s plenty more where that came so, in terms of the public face of the company, a makeover is direly needed.

But let’s say that an Uber IPO price per share has been set (we won’t know the actual figure until we near the actual IPO date): Should you buy Uber stock?

The company certainly has a strong base of customers, a giant valuation, strong backings from a number of big companies and has pretty much become the poster child for disruption. Consider how many elevator pitches now start out “It’s like the Uber of ____,” and you’ll see just how ubiquitous the company has become, especially in Silicon Valley lore.

All of that reverence has been gained for good reason. The company’s valuation speaks for itself. The disruptive powers of Uber to dramatically alter the ride service industry cannot be understated, but nor does that make the company impervious to all these challenges facing it down the road.

Its media image definitely needs work, and its formerly bullet-proof business model might not be as unassailable as first thought.

First you have the issue of duplication. While Uber was first in the market to popularize ride-sharing as an app (and has benefited greatly due to that initiative), competitors like Lyft are increasingly making a claim on Uber’s market share. And, all things being equal, if consumers are faced with a choice between the vilified Uber or the more personable Lyft, it’s not hard to imagine who they’ll be hailing. (Source: “Uber’s books still top secret, but its biggest weakness isn’t,CNBC, June 8, 2016.)

Then you have doomsayers who believe that the Uber is extremely overvalued, pegging the company’s valuation closer to $30.0 billion.

Critics also look to Uber’s retreat from the Chinese market against pressure from Didi Chuxing, closing the door on hundreds of millions of potential customers for the time being—and the company’s rapacious penchant for burning through cash—as two other big problems that need sorting out if the company wants to have a successful IPO. (Source: “An Expert in Valuation Says Uber Is Only Worth $28 Billion, Not $62.5 Billion,” Bloomberg, August 17, 2016.) 

The path to profitability is usually difficult for tech startups, but Uber will have to start pushing in that direction sooner, rather than later once it’s on the open market.

There’s certainly some darkness brewing on Uber’s horizon, but the ship is by no means sunk.

With a reported 40 million monthly active users in October 2016 and still tons of growth potential, Uber definitely is not to be counted out. (Source: “So how many customers actually deleted their Uber accounts?Mashable, February 2, 2017.)

The company was surpassed for the first time ever by Lyft in total downloads in the App Store following the #DeleteUber movement, sure, but it still has a wide margin of separation over its competitor. Lyft reported a comparatively tiny three million monthly active users in July 2016. (Source: “Lyft hits record 13.9M monthly rides, sees 5X quarterly growth in Concierge rides,TechCrunch, August 3, 2017.)

Recent events might have hurt the app, but a well-executed Uber IPO could be great for the company and investors alike.

When Will Uber Go Public? 

Much of the preceding information could be irrelevant until we know when Uber will be going public. That remains to be seen. While the company certainly has the ability to make a strong showing on the public stock market, the lack of a concrete path to profitability alongside its recent media troubles, and I’m thinking that the company will likely delay, at least for the near future.

Does that mean that Uber won’t go public in 2017? Not at all.

And will Uber be the hottest IPO of 2017? If it does indeed drop, then yes, it has a strong chance to be.

With that in mind, being prepared for when Uber does eventually get released into the wild can never hurt.

For investors greedily awaiting an Uber stock, they’ll have to watch and wait…and hope that Travis Kalanick and crew can avoid blunders along the way.