Uber is set to price IPO amidst concerned market
By Caoimhe Toman
Date: Thursday 09 May 2019
(Sharecast News) - Uber Technologies Inc is set to price its initial public offering on Thursday at a time when the price of its rival, Lyft is plunging and the market is showing concerns over the US-China trade war.
The company is aiming for a valuation of between $80.5bn and $91.5bn in an IPO that is set to be the most high-profile US listing since Facebook's seven years ago.
A lot of the price talk between Uber and its advisers is focusing around the mid-point of Uber's $44-$50 per share price range Wall Street sources said. Nevertheless, some analysts consider it to be overpriced.
The company will announce the price at the close of trading on Wall Street on Thursday night.
US investors are in a grim mood this week as concerns over the collapse of the trade talks between the US and China have ramped up.
Uber's main worry though is how to avoid a repeat of Lyft's poor debut, which saw the shares sell off after fetching a premium valuation in the company's late-March IPO.
Lyft's stock slumped nearly 11% on Wednesday to a record closing low of $52.91 and was trading well below the $72 per share IPO price after the company reported disappointing Q1 results.
CMC Markets chief market analyst Michael Hewson said: "In the case of Lyft it is hard to see any light at the end of the tunnel when looking at its numbers yesterday through the prism of an IPO price of $72, and a $24bn valuation. This always seemed completely detached from reality and the prospect of a price war with Uber and very little evidence that the company will be able to turn a profit any time soon has seen the dream turn sour very quickly, with the shares now just above $50. This still values the business at $15bn on total revenues of almost $3.3bn and losses of $1bn a year."
Uber is aiming to sell 180m shares in the offering to raise up to $9bn, with a further 27m potentially sold by existing investors for as much as $1.35bn.
The ridehailing company is one of the so-called "Unicorn companies" , the monicker for tech start-ups when they are valued at over $1bn.
Uber will follow rival Lyft, the popular internet bulletin board Pinterest, video conferencing software company Zoom Video and the vegan "meat" business Beyond Meat.
Hewson said: "So what to expect with respect to Uber, and while it is always desirable to expect the positive, one can't help feeling that once again there is a significant disconnect between the market valuation and the actual fundamentals, particularly since there is likely to be increasing pressure on margins as well as the prospect of further regulatory interference when it comes to employment practices.
"Estimates on revenues look set to improve from $11.27bn to $14.18bn this year, however losses are expected to rise to $5.4bn by the end of this year, and decline only slightly in 2020 to $4.1bn, according to Bloomberg estimates. With a valuation set to come in at $80bn this seems rather heroic and while management are likely to do well out of the IPO it is difficult to see too much upside for anybody else," he concluded.
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