A modest share pricing indicates that Uber is playing it safe with their IPO, but could possibly fall well below expectations.
End the drum roll – the Uber IPO is finally going live today.
Based on its disclosed share price which it announced on Thursday May 9th, Uber will be valued at $75.5 billion, which is below its last private market value of $76 billion, recorded in 2018.
Shares will go live at $45, on the lower-end of the $44-50 range it had stated – a rather conservative price.
Uber has had to be more realistic
All of the pomp and circumstance Uber had generated up to the event has eventually diffused and led to a more realistic IPO. However, Bloomberg notes that the fully diluted value of the company, including restricted stock units and other shares, could be about $82 billion. Still, it’s a far cry from the $120 billion figure we had been led to believe, even when analysts had ridiculed such claims.
Originally, banks had told Uber that it could reach this valuation - an overconfident amount for a company that has struggled to make a profit for years. Uber reported $11.27 billion in revenue in calendar year 2018 and lost $3 billion on operations.
Still, it’s too soon to reach a verdict on this whole affair, while we wait for the stock to hit the market. The tempered stock price has eased analysts’ concerns, though.
Analyst Daniel Ives of Wedbush Securities said in a note to investors that "we view Uber's conservative pricing as a smart and prudent strategy coming out of the box as it clearly learned from its 'little brother' Lyft, and the experience it has gone through over the past month.”
Lyft’s IPO is Uber’s cautionary tale
When competitor Lyft went through with their IPO on March 29th, the company had aimed for a valuation of $24.3 billion, based on a $72 priced shares, showing similarly lofty aspirations. The difference is, Lyft did not temper its share price more reasonably before going ahead with the offering. Two days after Lyft had begun trading, analysts said the stock's failure to hold the offer price means it was priced too high… [where] Lyft [stock] lost nearly 12%, as per CNBC.
Uber seems to have learned from its competitor mistakes.
“[Uber] is hoping to avoid the tumultuous first weeks of trading rival Lyft Inc. [went through], whose shares fell below its $72 IPO price within days of listing and closed 23% below that price Thursday [May 9th],” Bloomberg said.
As such, “Uber has prioritized selecting shareholders -- particularly institutional investors -- that it thinks will hold on to the stock for a long time, according to a person familiar with the matter.”