Uber raises $8.1bn as it makes stock market debut

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Uber's ride-hailing service reaches over 700 cities in 63 countries.
Uber's ride-hailing service reaches over 700 cities in 63 countries.

Uber Technologies yesterday priced its initial public offering (IPO) at the low end of its targeted range, underwhelming the market as it attempted to avoid a trading plunge like the one suffered by ride-hailing rival Lyft in March.

Uber will float 180 million shares on the New York Stock Exchange today at $45 per share, close to the bottom of the targeted $44-$50 range. It is raising $8.1 billion through the IPO, which is one of the most highly anticipated stock market listings in the tech world since Facebook made its Wall Street debut seven years ago.

CEO Dara Khosrowshahi is expected to ring the opening bell today, with reports circulating that Uber co-founder Travis Kalanick, who resigned as CEO following a string of scandals in 2017, will not attend the ceremony.

Based on the amount of stock outstanding after the offering, the IPO price gives Uber a market value of around $75.5 billion, according to Bloomberg, which is just below its last private market value of $76 billion. The fully diluted value, including restricted stock units and other shares, could be about $82.4 billion.

The Wall Street debut will gauge investors' appetite for the prospects of the tech company which has expanded swiftly from taxi services into food delivery and continues to invest in the development of driverless cars.

Even at the bottom end of the price range, Uber's listing is set to be among the 10 largest US IPOs of all time. However, its valuation is a lot lower than some expected, with bankers last year predicting the tech company could be valued at as much as $120 billion.

The IPO was oversubscribed, but Uber reportedly went for a more conservative price to avoid a repeat of Lyft's IPO on the Nasdaq in late March, which priced strongly at $72 per share, but plunged below this within days of listing.

Lyft's share price has fallen about 23% from its IPO price and was trading at $55.18 at the market close yesterday.

Crunch time

Uber CEO Dara Khosrowshahi.
Uber CEO Dara Khosrowshahi.

Analysts, however, believe Uber's IPO still represents a watershed moment for the company, which has grown into the world's largest ride-hailing firm over the last 10 years.

However, market conditions are less than ideal for the listing as US stocks continued to fall yesterday, leaving the S&P 500 index on pace for its worst week of the year, as trade tensions between the US and China escalated.

Uber also still faces questions as to when it will become profitable, after losing $3 billion from operations in 2018, bringing total operating losses over the past three years to more than $10 billion.

According to Reuters, in meetings with potential investors over the past two weeks, Khosrowshahi argued that Uber's future was not as a ride-hailing company, but as a wide technology platform shaping logistics and transportation.

Uber's ride-hailing service remains its core business, now reaching over 700 cities in 63 countries. But the company has also diversified into bike and scooter rentals, food delivery and freight, and is investing in driverless car technology.

Meanwhile, Uber's drivers are not all on board with the IPO and hundreds of drivers protested outside the company's San Francisco headquarters on Wednesday, calling for better wages, benefits, transparent policies and a voice in the company. Other protests were reported in over two-dozen cities around the world.

Uber's recent float prospectus revealed the company had 91 million monthly active platform consumers at the end of 2018.

During the quarter ended 31 December 2018, there were 1.5 billion trips on the platform and Uber had 3.9 million drivers globally. Uber said its drivers have earned over $78.2 billion on the platform since 2015, as well as $1.2 billion in tips since it introduced in-app tipping for drivers in July 2017.

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