Coming off a banner year of 273 initial public offerings (IPOs) in 2014, there’s much anticipation surrounding a possible Uber IPO in 2015.
Uber’s $41.0-Billion Valuation
As far as IPOs go, 2014 was a significant year. The last time the markets saw so much activity was during the halcyon days of the dot com era, when 400 companies debuted in 2000.
While its unlikely 2015 will be as active, many are eyeing Uber as this year’s highest valued IPO candidate. And why not? Uber’s valuation sits at $41.0 billion (at least on paper)!
Most recently, in December, the company announced that it raised $1.2 billion in its latest round of financing. The money will be used, in part, to expand its workforce, bring in new drivers, and test-run a delivery service. (Source: Uber, December 4, 2014.)
With operations in more than 250 cities in 50 countries, Uber has raised nearly ten times as much capital as its rival Lyft Inc.
In total, Uber has raised $5.9 billion, has a valuation of $41.0 billion, and is looking to rank number one in its service field globally. Meanwhile, Lyft has raised $330 million to date and is looking to raise another $250 million, valuing it at $2.0 billion. As for expansions, for now, Lyft is concentrating on expanding its services nationally.
So while Uber and Lyft might be operating in the same field and are technically competitors, Lyft is a distant second. That doesn’t mean Lyft couldn’t give Uber a run for its money in any number of individual U.S. centers, though.
At the same time, Uber is taking steps to enhance its services and to put even more distance between itself and the competition. The company recently announced it purchased digital mapping company deCarta. The terms of the deal were not disclosed. (Source: Mashable, March 3, 2015.)
The acquisition is expected to help the company improve its car-pool service (UberPool), estimated time of arrival, and estimated trip time, among other factors. Snapping up deCarta also means Uber won’t have to rely on navigation services from Google Inc. and Apple Inc. While not as well known as “Google Maps,” the “OnStar” system relies on deCarta, as do navigation applications on smartphones from BlackBerry Limited and Samsung Electronics Co. Ltd.
Also Read:How Does Uber Make Money?
Controversies Surrounding Uber
Though it may have a great business model, it’s not all good news for Uber. The company continues to be hounded by a number of high-profile controversies.
In fact, 2014 was a very tumultuous year for the company. Uber was hit with drivers making claims about unfair treatment, passengers being sexually assaulted, regulators trying to shut down the service, and ongoing conflicts with the taxi industry.
When Will Uber IPO?
Despite the bad PR, Uber has time to polish its reputation, because when push comes to shove, the company doesn’t need to IPO any time soon. It’s not as if it’s hurting for money and it certainly isn’t going to drop off the investing radar.
Again, the company has a valuation of $41.0 billion. Plus, more money is on the way—not because an Uber IPO in 2015 has been announced or hinted at, but because hedge funds and high-net-worth investors need somewhere to invest their money in an overvalued market.
So what are IPO-hungry investors to do?
If you’re looking for a giant IPO like Facebook, Inc., Twitter, Inc., or Alibaba Group Holding Limited, you’re probably going to have to wait.
Admittedly, not all recent IPOs are down, but a number of high-profile ones are. Shares in Alibaba (the biggest IPO to date) are down more than 10% from its September 2014 IPO price and down more than 30% since November. Meanwhile, zulily, inc. is trading approximately 60% below its 2013 IPO price, while Shake Shack Inc. is down almost 10% from its February debut.
Private companies like Uber will hit the Street when it makes sense for them to do so. The markets might be at record highs, but they remain volatile, which will delay some stock market starts. On top of that, the prospect of rising interest rates could also put the brakes on some IPOs.
But if not now, then when might be the expected Uber IPO date? Flush with cash, an Uber IPO would be more likely in 2016 or even 2017, as the company expands its operations, looks to boost its reputation, and perhaps eventually boasts an even higher valuation (more than $100 billion?).
To be sure, when Uber does IPO, it is expected to be the hottest offering of the year.