Uber Lowballs IPO, Eager to Avoid Lyft's Fate

Steph Willems
by Steph Willems

Ride-hailing company Uber approached its Thursday initial public offering with an abundance of caution, setting a lower-than-expected share price in a bid to avoid rival Lyft’s stock plunge.

When markets open Friday, Uber’s stock will be priced at $45, near the bottom of a previously stated range that topped out at $50. That puts Uber’s initial valuation at just over $82 billion. Amid controversy surrounding its business practices and growing uncertainty about the viability of huge ride-hailing firms, Uber hopes to raise $8.1 billion from its IPO.

As stated by Barron’s, Uber’s initial valuation is well below the $100 billion it hinted to investors a while back. The urge to go high may have been strong, but a quick look at Lyft’s stock would give anyone in the same business second thoughts.

Lyft entered the stock market in March, its shares priced at $72. The following two months has seen the company’s share price nosedive, and Tuesday’s first-quarter earnings report, which showed a $1.1 billion loss, didn’t help. Lyft’s share price hit a new low the following day, bottoming out at $52.91.

“We continue to view Lyft’s stock performance and lack of disclosures going forward (bookings, take rates) as the 1-2 punch, which, coupled with a choppy tech tape, caused Uber to look at a more conservative price range based on its demand for its IPO, a prudent strategy in our opinion coming out of the box,” said Wedbush Securities analyst Dan Ives in a Wednesday note.

Uber lost more than $3 billion last year. Under CEO Dara Khosrowshahi, the company aims to pivot from a ride-hailing company to a more diverse entity offering tech and a range of transportation solutions. The company earned widespread criticism and put its self-driving test program on hold following its involvement the world’s first autonomous car pedestrian fatality. That incident took place in Tempe, Arizona, in March 2018.

“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, founder of data firm Sageworks. “If you buy, you are buying a bull market, not a company.”

[Source: Reuters] [Image: Uber]

Steph Willems
Steph Willems

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  • Alfisti Alfisti on May 10, 2019

    How on EARTH do these companies lose money??? It's just an app! I know developers are expensive but ... it's just an APP! Absolutely baffles me.

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    • Cashmoney Cashmoney on May 10, 2019

      @SPPPP Google Hubert Horan’s articles about Uber’s finances and accounting. Enjoy the subsidized rides but under no circumstances should anyone invest. There’s no credible plan for becoming profitable.

  • YellowDuck Really surprised it's only 1/3. Lack of Android Auto would be a dealbreaker for me. At this point I might even say it needs to be wireless. I can't believe any manufacturer would still be trying to sell built in nav as like a $1500 option. Must sell it to people with flip phones.
  • Mike Beranek Great subject for a multi-part piece. There's a lovely DTS for sale near my work... does anyone have a year that the Northstar becomes buyable? I've heard both 2005 and 2007.
  • Parkave231 Looking forward to this deep dive, Corey. My '02 Deville was right on the cusp of when they "fixed" the head bolt issues, but I really don't know if mine was one of the improved ones. Still, it never gave me problems during ownership, aside from the stupid intake plenum duct issue, which was the one time I'll admit I bit off a little more than I could chew.Smooth engine, decent low-end torque for an OHC engine, and whisper quiet. I got great gas mileage out of it too. But how could GM ever screw up head issues on two V8s in a row?
  • Mike Beranek I wouldn't want to own this car. But I sure would love to borrow it.
  • CFS I can’t believe these comments aren’t 100% in favor of CarPlay/Android Auto. They don’t add much for music and other audio that you don’t get with just a Bluetooth connection, but they make navigation so so much better. Why is it better? Because inputting the destination address is so much easier. And I don’t need to think about updating my car’s maps. Plus, I can switch between Google Maps, Waze, Apple Maps, or whatever else seems best suited for my trip. Hands-free calling features are OK, but not such a big deal for me.