Amid Market Volatility, Uber Prices Its IPO at $45 Per Share

Shutterstock TY Lim
May 9, 2019
Updated 8d ago

By Spencer Feingold

Uber priced its initial public offering at $45 per share, the very low end of its anticipated price range, on Thursday after the bell — valuing the company as high as $82 billion.

The company set its price range at $44 to $50 per share late last month, which was already lower than where shares were previously rumored to be valued. Uber plans to sell 180 million shares on Friday when it begins trading on the New York Stock Exchange (NYSE) under the ticker UBER.

While the IPO was highly anticipated, Wall Street had rather tempered expectations ahead of the pricing.

“There is an argument to say that under the current environment and everything else that is going on that pricing in the midpoint is quite a success,” Barrett Daniels, a partner at Deloitte & Touche’s National IPO Services, told Cheddar.

The ride-hailing giant goes public during a volatile week with markets on edge over the possibility of increasing tariffs on Chinese imports and a fallout in trade talks between the U.S. and China. Stocks across the board fell in recent days, with major indexes — all down more than 3 percent — on pace for their worst week of the year. Apple ($APPL), for example, lost $47 billion in market value this week; Amazon ($AMZN) and Alibaba ($BABA) both lost more than $30 billion.

“Clearly they are little bit unlucky with where things sit right now,” Daniels added. But analysts note that the time for Uber to postpone its first day of trading had long passed.

“Undoing all this process to go public would be a nightmare in and of itself,” Phil Haslett, co-founder of the pre-IPO marketplace platform EquityZen, told Cheddar earlier Thursday. “We are really past the turning point for them.”

The Wall Street Journal had even reported on Wednesday that Uber might even price its shares below the expected range, citing sources familiar with the matter.

Seen as a behemoth in the ride-sharing space, Uber completed 14 million rides a day in 2018, driving customers 26 billion miles, according to the company’s filing with the federal Securities and Exchange Commission(SEC). Since its founding in 2009, the company has completed a total of over 10 billion rides and has expanded to more than 700 cities in over 60 countries.

“Because we are not even 1 percent done with our work, we will operate with an eye towards the future,” Dara Khosrowshahi, the company’s CEO, wrote in the filing.

Uber — whose name is now used as verb by city dwellers across the world — has already expanded its business to include services like Uber Eats, a food delivery platform, and Uber Freight, which creates an on-demand marketplace for shippers and carriers. The company also established an internal Advanced Technologies Group in 2015 that focuses solely on developing autonomous vehicle technologies.

“A company like that, that grows that fast, it is just hard to prepare to be a public company,” Daniels said.

Uber’s IPO follows the rocky market debut of Lyft, which is still much smaller than Uber but is its primary North American competitor. As the first ride-sharing company to go public, Lyft ($LYFT) roused investors for months ahead of its listing in March. Shares, however, have been down 20 to 30 percent since closing at $78.29 — up from its IPO price of $72 — on its first day of trading on the Nasdaq.

Yet, Uber going public “is a defining moment, cementing the transition from car ownership to access,” Sam Zaid, the CEO of the car-sharing company Getaround, told Cheddar. “We are witnessing the disruption of car ownership — the idea of buying a car to drive everywhere has become passe.”

Like Lyft, Uber will go public before the company reaches profitability. Uber reported $11.3 billion in revenue last year, a sharp increase from the $7.9 billion in revenue in 2017. However, it expects to post a loss of between $1 billion and $1.1 billion in the first quarter of 2019.

“Eventually these companies absolutely need to be profitable,” Ajay Chopra, general partner at the investment firm Trinity Ventures, told Cheddar. “But I think there are indications that they have a path to profitability.”

Adding to the company’s challenges, Uber drivers across the U.S. and in several other countries went on strike this week for better pay and increased job security. Most participating drivers logged off the app during morning commute hours on Wednesday and demanded the platform lower its commission fee from 25 percent to 10 or 15 percent. Protesters are also expected to greet Khosrowshahi and Nelson Chai, Uber's chief financial officer, outside the NYSE Friday morning.

“This is IPO season — you get lucky sometimes and sometimes you don’t,” Daniels said of Uber's debut.