Uber unveils IPO with warning it may never make a profit
Published 12-APR-2019 10:51 A.M.
4 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Uber Technologies Inc. has 91 million users, but growth is slowing and it may never make a profit, the ride-hailing company said in its initial public offering filing writes Joshua Franklin.
The document gave the first comprehensive financial picture of the decade-old company which was started after its founders struggled to get a cab on a snowy night and has changed the way much of the world travels.
The S-1 filing underscores the rapid growth of Uber's business in the last three years but also how a string of public scandals and increased competition from rivals have weighed on its plans to attract and retain riders.
The disclosure also highlighted how far Uber remains from turning a profit, with the company cautioning it expects operating expenses to "increase significantly in the foreseeable future" and it "may not achieve profitability."
Uber lost $3.03 billion in 2018 from operations.
The filing with the US Securities and Exchange Commission revealed Uber had 91 million average monthly active users on its platforms, including for ride-hailing and Uber Eats, at the end of 2018. This is up 33.8 percent from 2017, but growth slowed from 51 percent a year earlier.
Uber had not disclosed the latest user numbers before, and the figure indicates the scale of the business. Although its user base includes customers of other services as well as ride-sharing, Uber's 91 million is nearly five times the 18.6 million announced by rival Lyft Inc.
Uber in 2018 had revenue of $11.3 billion, up around 42% over 2017, again below the 106% growth the prior year.
Uber set a placeholder amount of $1 billion but did not specify the size of the IPO.
Reuters reported this week that Uber plans to sell around $10 billion worth of stock at a valuation of between $90 billion and $100 billion. Investment bankers had previously told Uber it could be worth as much as $120 billion.
Uber would be the largest IPO since that of Chinese e-commerce company Alibaba Group Holding Ltd in 2014, which raised $25 billion.
Although Uber is no longer targeting a $120 billion valuation in the IPO, some stock bonuses to Chief Executive Dara Khosrowshahi and other company executives are only triggered when that valuation is reached.
Uber will follow Lyft in going public. Shares in its smaller rival closed at $61.01 on Thursday, 15% below its IPO price set late last month, a development which has sent chilling signal for other tech start-ups looking to go public.
After making the public filing, Uber will begin a series of investor presentations which will start the week of April 29. The company is on track to price its IPO and begin trading on the New York Stock Exchange in early May.
Uber faces questions over how it will navigate any transition towards self-driving vehicles, a technology seen as potentially dramatically lowering costs but which could also disrupt its business model.
One advantage Uber will likely seek to play up to investors is that it is the largest player in many of the markets in which it operates. Analysts consider building scale crucial for Uber's business model to become profitable.
In addition to answering questions about the company's finances, Uber CEO Khosrowshahi will be tasked with convincing investors that he has successfully changed the culture and business practices after a series of embarrassing scandals over the last two years.
Those have included sexual harassment allegations, a massive data breach that was concealed from regulators, use of illicit software to evade authorities and allegations of bribery overseas. Khosrowshahi joined Uber in 2017 from Expedia Inc to replace company co-founder Travis Kalanick who was ousted as CEO.
Uber said in its filing its ride-hailing position in the United States and Canada was "significantly impacted by adverse publicity events" and that its position in many markets has been threatened by discounts from other ride-hailing companies.
A #DeleteUber campaign surged on social media in 2017 after a public relations crisis, which Uber said in its filing meant hundreds of thousands of consumers stopped using its platform within days.
Uber said its market share fell in most regions last year, although the rate of decline has slowed. The company claims more than 65% market share in the United States and Canada, compared to Lyft's stated 39 percent in the United States.
Uber is reserving some shares in the IPO for drivers who have completed 2,500 trips among other criteria.
Additional reporting by Nivedita Bhattacharjee
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.