Where Does Uber IPO Stand Post CEO Exit?
Uber Technologies, Inc. CEO Travis Kalanick resigned his position on Tuesday night, hopefully bringing an end to a dark chapter in the company’s history. He was forced out by venture capital investors, who were no doubt worried that Kalanick was dragging down the Uber stock price per share. (Source: “Uber CEO Travis Kalanick has resigned due to investor pressure, and a search for a new leader is on,” Recode, June 21, 2017.)
There was certainly no chance of an Uber IPO while the firm was buried in scandal; the public perception of Uber had fallen too far. It’s not exactly what you would want as a company trying to sell stock to investors.
You’d want glowing editorials, bullish coverage from analysts, fervor on the message boards. That is how you get an oversubscribed IPO.
Uber is, to put it mildly, not in that position.
It is plagued by sexual harassment cases, software that borders on illegal, a lawsuit from Google, and an out-of-control management team. The endless stream of bad press was a nightmare for many venture capital investors, especially since Uber is the highest-valued startup of all time.
Not the highest-valued startup of this year, or last year, but of all time.
With all that kind of baggage, an Uber IPO seems less likely than we previously thought. But allow me to play the devil’s advocate for a moment. What if we’re looking at this the wrong way?
We know that Uber is a cash-intensive business. It burns more money in a single year than most companies make. So we know it will need to raise money soon. But will it be able to in private markets? I don’t think so.
It may have no choice but to go public.
Until now, Uber was able to postpone its IPO because venture capital investors were tripping over themselves to get a piece of Uber stock. That isn’t the case anymore.
Venture capital investors are finally growing wary of Uber’s $70.0-billion valuation. If they refuse to invest another dime, the company will have no choice but to seek alternative sources of funding.
An Uber IPO might end up being the only option.
When Will Uber IPO?
As a private company, Uber is not obligated to reveal its finances. We only know about the losses because Uber chose to reveal them. So I cannot say definitively when the money will run out, only that it should become a problem sometime next year.
Lyft, Inc., Uber’s main competitor, recently raised $600.0 million. It is nipping at Uber’s heels, which effectively means that Uber has to outspend Lyft on promotions. It must protect its market share or else the entire enterprise is doomed to fail. (Source: “Lyft Raises New Capital to Continue Growth,” Lyft Blog, April 11, 2017.)
I believe this external threat could force an Uber IPO within the next 12 months.
It’s not as impossible as it sounds. Here’s a rough game plan that Uber would likely follow if it wants to see an UBER stock symbol in 2018.
- Recruit a seasoned CEO.
- Find a genius COO.
- Go on an apology tour.
- Implement recommendations from the Holder report.
- Start courting Wall Street.
The best-case scenario is that Uber goes forward with grace and humility, holds a successful IPO, and keeps outgrowing its losses until it turns profitable. Let’s call this the “Amazon Road.”
The worst-case scenario is that Uber falters on any one of these steps, holds a disastrous IPO, and loses market share to Lyft or other rivals. Let’s call this the “Twitter Road.”
I don’t have a “Magic 8 Ball,” but it seems like the Amazon Road is far more likely.
Rightly or wrongly (I think rightly), Travis Kalanick was the scapegoat Uber needed. With him gone, there is a chance to salvage the company’s future.