Uber IPO

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Matrick - Certified Professional
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Dara Khosrowshahi starts off with a bang:

Uber's new chief executive Dara Khosrowshahi set out a bold vision in his first meeting with employees on Wednesday, saying that he hoped for an initial public offering within 18-36 months and would work to stem the car-hailing app's market share losses in the US.

FT - New Uber chief aims for IPO within 18-36 months

Opinions?

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Comments (38)

Sep 2, 2017

Personally, I don't rushing for an IPO will solve everything. He should really first get the lay of the land and stabilize all the drama coming out of Uber. Once everything is back to some kind of normalcy, then IPO should be considered.

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Sep 2, 2017

The only reason for drama in the first place is that Kalanick wasn't onboard with a quick IPO. You think VC firms and the Uber board can't quiet down a few sexual harassment claims? All they had to do was "not help" when the drama started and they'd get their IPO wish.

Sep 2, 2017

I think it was more than just Kalanick not being on board with a quick IPO. I could be wrong (most likely am) but I'm sure there's still reports of diversity problems floating around?

Just an Undergrad trying to get a job. Something you disagree or dislike about my posts? Let me know by PM'ing me or commenting constructive criticism.

Sep 2, 2017

That's what I'm saying: those problems would have been taken care of long ago if Kalanick had the right allies. Discrimination and harassment are enough to take down executives, but not a whole company. Nothing but weapons in the political landscape.

Sep 2, 2017

The real question is that if they do file for an IPO, who's going to win lead left and what will that bake-off look like?

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Sep 3, 2017

I think you'll see the usual suspects , some combo of GS, MS, JPM as bookrunners ... Allen & Co will probably find their way in as well.

Sep 4, 2017

My money would be on MS. I mean Google, Facebook, Snap... they land the biggest deals given their notably strong equities platform plus Michael Grimes. Dara did spend time at Allen & Co though, so that will be interesting...

Sep 3, 2017

I think an IPO is good, if they need the capital to expand. I envision the next moves for Uber to be air travel and driverless cars. They probably need more capital to commercialize that and do all the regulatory work.

Sep 5, 2017

Very interesting stuff

Sep 5, 2017

Years away if what the founders are intimating is true. And it will be majorly overpriced (barring a sudden turn to profitability) when it does happen

Sep 5, 2017
CalvinC:

Years away if what the founders are intimating is true. And it will be majorly overpriced (barring a sudden turn to profitability) when it does happen

Really? Tell me more of your investment thesis on technology companies - seems like you know more as an intern in PE than the VC partners fighting to get into the latest billion+ dollar round at Uber or the buyside funds investing in unprofitable publicly traded tech companies.

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Sep 5, 2017

You don't think tech is a tiny bit overvalued right now??

Sep 5, 2017

I dont think that is really relevant. Your hypothesis is that Uber is overvalued due to not being profitable. If that is true then there are a lot of very established tech cos that are in trouble, which is possible. This school of thought reminds me of those who said that Zuckerburg would never have a real business model, and that Spiegel is an idiot for turning down the $3b offer Facebook gave him. I don't want to get into a bubble argument, but all I am saying is that there are a lot of very smart people who would pay a lot of very real money for this echelon of companies and even without IPO there are a lot of modern ways of producing liquidity for said cos.

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Sep 5, 2017

Uhhh... see the most recent tech crash or any of the numerous before that. They're playing a game of the greater fool and realize valuations typically only go up once there's momentum so these guys know they'll cash out at the IPO at greater than full value. It says nothing whatsoever of UBER's legitimacy as an actual cash flowing business and their barrier to entry is an app that a CS student could design. Unlike something like a social network, critical mass isn't crucially important and the market can return to its previously fragmented regional / metro system.

Sep 5, 2017
juniormistmaker:

Uhhh... see the most recent tech crash or any of the numerous before that. They're playing a game of the greater fool and realize valuations typically only go up once there's momentum so these guys know they'll cash out at the IPO at greater than full value. It says nothing whatsoever of UBER's legitimacy as an actual cash flowing business and their barrier to entry is an app that a CS student could design. Unlike something like a social network, critical mass isn't crucially important and the market can return to its previously fragmented regional / metro system.

Uber could charge 50% more, and it'd still be more convenient than a taxi. I'm not saying they're primed for long term success, but their business model is solid. Although, you're right; they very well may be sucking water once competition steepens.

Sep 5, 2017

An IPO is often literally an opportunity to sell shares at the highest possible price. A different side to your argument is the fact that a lot of very smart money will never touch IPOs for that very reason. It's extremely likely an Uber IPO will be overpriced.

Sep 5, 2017

can you even IPO a company with a -0.5billion in NET income ?

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Sep 5, 2017
Saad-Filali Khattabi:

can you even IPO a company with a -0.5billion in NET income ?

See every tech IPO ever.

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Sep 5, 2017
Saad-Filali Khattabi:

can you even IPO a company with a -0.5billion in NET income ?

How do you think the tech bubble happened?

History may not repeat but it tends to rhyme.

Sep 5, 2017
Sep 5, 2017

After the global strategy is further along in execution and other revenue channels beyond taxis are competitive.

Best Response
Sep 5, 2017

I just want to take this post to say f#ck taxi drivers. Every time I travel with my 50-year-old MD, he insists on using a taxi because he is not familiar with Uber, and every time the cab stinks, the driver is rude, and the credit card machine is "broken".

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Sep 5, 2017

lol. Uber and lyft are my only options and I have to say I don't mind it at all. Very convenient and quick service. I think yellow taxis would be sketchy in my area.

Sep 5, 2017

Sounds like you need to step up and tell your out of date MD that he's going to try Uber.

Sep 5, 2017

Investing in tech companies only works from a "greater fool" perspective. I predict uber will be bk before it goes ipo and revealed to be a Ponzi scheme.

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Sep 5, 2017

"all I am saying is that there are a lot of very smart people who would pay a lot of very real money for this echelon of companies"

Yes the madness of crowds.

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Sep 5, 2017

Operating losses can make extremely valuable acquisition targets, as well as the value of sales etc.

IMHO going to be distressed buyout by FB in 2022.

Sep 5, 2017

Link below has some goodies to think about. Dan Primack's "Term Sheet" from 11/02/15 (Erin Griffith filling-in) had some interesting followup as well.

http://fortune.com/2015/10/16/unicorns-ipo-market/

Sep 5, 2017

I'm kind of a curmudgeon when it comes to investing, I like widget makers and service providers, and I'm not keen on investing in companies with no bottom line, but if you know anything about the business cycle, you know there are years of losses before you get to profitability, so that doesn't mean that uber is a disaster waiting to happen.

here's the thing with uber, they are a tech company yes, but they still have a valuable service, much like an Amazon, ebay, or Visa: they are a middleman, linking consumers with providers. this is unlike snapchat, facebook, yelp, and youtube, where your revenue is dependent upon the advertising budgets of other companies, and you provide no actual billable service (aside from the paid ad-free versions of some sites). they could be the next google, or they could be another pets.com.

my opinion is that the overvaluation that will ensue and the murky regulatory environment makes it difficult to justify investment in something like that. they may very well change the world and become the next google, but google and Amazon didn't have these regulatory issues to my knowledge. if the regulatory environment improves and they experience rapid earnings growth to justify their multiple, uber could be a game changer, but I'm not going to touch it.

Sep 5, 2017

To add to your point, I think that as it grows rapidly it becomes harder and harder for regulators to just shut it down. That, to me, is why people are willing to funnel all kinds of money into it and it's what is driving the immense value. It's going to entirely upend an industry and the more momentum it gets the better chance it has of succeeding. It's absolutely risky as hell, but so far it looks to be working.

Sep 5, 2017

completely agree, my concern with regulation is not from them outright banning it, because that won't work, but more to the tune of them redefining what a contract employee is, what a taxi driver is and isn't, and essentially forcing uber to pay fees to the gummint to be registered as a taxi, buy medallions, have health insurance for employees, offer liability insurance to riders, etc etc.

regulators cannot stop uber, but the reason uber has been so successful is because it's been able to go around existing rules, and regardless of whether or not the laws get rewritten in their favor, I still think there's more sizzle than steak.

Sep 5, 2017

also, to anyone who says IPOs are overpriced, that's exactly the point. equityholders want to maximize their value, bankers want a higher valuation for more fees, and the public is collectively stupid enough to eat it all up.

what everyone hopes will happen is that the company turns into a GOOGL or V or MA, growing earnings so fast from a high valuation that the price then becomes justified.

if sensible valuation is what was pitched in boardrooms, IB would be a much less lucrative career, and it's a shame most of you didn't realize that.

Sep 5, 2017

Almost took a job at Uber in a strategy & planning role. One of the things that put me off was the comp was below what I already get in banking. They tried justifying this by saying the stock options would more than make up for it, but I had a hard time believing that when the valuation is already >$50B. Plus the fact it's not listed makes it difficult to liquidate your stock. This makes me think it will IPO sooner rather than later since the thousands of early employees can't yet take their chips off the table.

On the other hand, in discussing this with someone who is involved in building their upcoming infrastructure, it seems like the grand vision of Uber could mean than IPOing now would severely undervalue the potential upside. Management doesn't see a need for public funding and don't want to be subjected to the whims of quarterly reporting. If in 5-10 years Uber succeeds at becoming a road-based transport utility with a fleet of autonomous electric vehicles (meaning the regulation issue is eliminated since there are no drivers), or their software becomes the de facto autonomous operating system for all new cars worldwide a la microsoft windows, this valuation could be $500B+. Or it could be nothing. But to most employees drinking their Uber-flavoured koolaid they have no reason to cash out now..

Sep 5, 2017

I hope it IPOs so I can short the fuck out of it. Uber is a massive platform but they have grown too fast and the quality of their service/platform is declining. It is basically taxi drivers that just buy nicer cars at this point. Uber X and Uber black car are both bad and getting worse.

Sep 5, 2017

I fucking love uber

Sometimes I don't even have anywhere to go and I just get into a crisp new uber to be driven around

Sep 5, 2017
Sep 5, 2017

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