Uber valued at low end of US$82b in IPO as market jitters, Lyft woes weigh

Uber priced its initial public offering on Thursday at the low end of its targeted range to value the company at US$82.4 billion (S$112.4 billion) , hoping the conservative approach would let it avoid the market chaos suffered by rival Lyft.
Uber's market value would be at least US$75 billion, and US$82 billion if all pending stock options and grants are included.
Uber's market value would be at least US$75 billion, and US$82 billion if all pending stock options and grants are included.PHOTO: REUTERS

NEW YORK (REUTERS) - Uber Technologies priced its initial public offering (IPO) on Thursday (May 9)  at the low end of its targeted range to value the company at US$82.4 billion (S$112.4 billion) , hoping the conservative approach would let it avoid the market chaos suffered by rival Lyft.

Uber, the most high-profile US listing since Facebook seven years ago, raised US$8.1 billion, pricing its IPO at US$45 per share, compared with an expected range of US$44-50 per share.

Uber's IPO came against a backdrop of turbulent financial markets, fueled by the trade dispute between the United States and China, as well as the plunging share price of Lyft, which is down 23 per cent from its IPO price in late March.

Uber's valuation is almost a third less than the valuation of up to US$120 billion that its investment bankers predicted last year.

The IPO was oversubscribed, but Uber settled for a lower price to avoid a repeat of Lyft's IPO in late March, which priced strongly then plunged in trade. Uber also wanted to accommodate big mutual funds, which unlike hedge funds put in orders for a lower price.

Lyft's stock slumped nearly 11 per cent on Wednesday to a record closing low of US$52.91, well below the US$72 per share IPO price, after the ride-hailing company reported a US$1.1 billion quarterly loss.

Some still consider the stock overpriced.

"Uber is basically Lyft 2.0. Good model, growing sales. But, yet again, here comes California math once more. It is still losing a ton of money," said Brian Hamilton, a tech entrepreneur and founder of data firm Sageworks. "If you buy, you are buying a bull market, not a company," he added.

In meetings with potential investors the past two weeks, Uber's chief executive Dara Khosrowshahi argued that Uber's future was not as a ride-hailing company, but as a wide technology platform shaping logistics and transportation.

The company is hoping this pitch, coupled with any fear of missing out what is expected to be the biggest IPO of 2019, will support demand.

The IPO pricing is a balancing act for Uber's team of underwriting banks, led by Morgan Stanley, Goldman Sachs and Bank of America Merrill Lynch, to negotiate a good price while leaving some upside to ensure the stock trades up on its market debut.

Uber lost US$3.03 billion in 2018 from operations, and reported a net loss attributable to the company for the first quarter of 2019 of around US$1 billion on revenues of roughly US$3 billion.