Surprise Uber IPO price shows it fears following in Lyft’s footsteps

10 May 2019

An Uber car. Image: Vicdemi/Depositphotos

Ahead of one of the most anticipated IPOs in recent years, Uber is not taking any risks by lowballing its price to protect its future.

Last month, ride-hailing giant Uber said it wanted to raise approximately $10bn in what would have been one of the largest tech IPOs of all time. One month on, things don’t look as rosy for the Silicon Valley company from a financial perspective after it admitted that it may never make a profit.

Reuters has reported that it has now priced its IPO at the lower end of its targeted range, with a valuation of $82.4bn. This means Uber has raised $8.1bn, putting its IPO at $45 per share, compared with the $50 it would have preferred.

These figures are almost a third less than what investment bankers had predicted last year, but still puts Uber ahead of its most recent valuation of $76bn through private fundraising. While oversubscribed, Uber decided to settle on the lower price, fearing it could experience what happened after the IPO of its rival, Lyft.

Uber’s moustachioed car rival filed for an IPO in December last year and subsequently went ahead with it in March. While priced strongly in the beginning, its price plummeted soon after and is now down almost a quarter since then.

With the $8.1bn now raised, Uber said it plans to use it to fund expansion into new markets as well as bolstering its autonomous vehicle and food delivery divisions.

The company’s CEO, Dara Khosrowshahi, has recently said that he doesn’t see Uber being a ride-hailing company in the future. Rather, he sees it as being a tech company working to shape logistics and transportation, but some fear Uber will fall victim to the same fate as Lyft.

“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, to Reuters. “If you buy, you are buying a bull market, not a company.”

An Uber car. Image: Vicdemi/Depositphotos

Colm Gorey was a senior journalist with Silicon Republic