Uber’s IPO Didn’t Go Quite as Expected, But the Company Still Raised Billions

Business September 1, 2019

When Uber first launched ten years ago, it almost instantaneously became a household brand. However, despite its success on the business front, the company has occasionally been marred by controversies such as gender discrimination and a breach of business ethics. All the same, the ride-hailing app has always managed to come out of troubled waters unharmed.

IPO Anticipation

Top company executives gathered for the IPO

The company just went public earlier this month in what was probably the most anticipated IPO in the history of the stock market. It was also highly valued, but it hasn’t exactly been the enviable start the company wanted which meant that the company would find it a daunting task to turn profits. And naturally, investors were worried.

After the initial public offering went live, shares tanked and went down by more than 7%. This was on Thursday, 9^th May, with the day ending on a low. Business analysts had predicted a share price ranging anywhere between $44 and $50, and the company priced them at $45 per share.

Uber’s IPO made 180 million shares available to the public, making $8.1 billion in total. This is a far cry from the $120 billion valuation (by Goldman Sachs and Morgan Stanley) the company had received in the build-up to the public offering, prompting some investors to put up their shares for sale, 27 million to be specific.

A more reasonable company valuation set it at $82 billion, which is also miles from the actual $8 billion. Admittedly, the IPO completely diluted the mega-billion talk. Still, bankers and analysts alike expect it to be among the most valuable Silicon Valley IPOs this year.

UBER

In the NY Stock Exchange, the company’s shares will trade under the UBER symbol. If you’re thinking about getting yourself some, Warren Buffett’s remarks may make you a little apprehensive. The magnate is steering clear of the Uber stock and says that he rarely buys into IPOs.

That being said, investment is a risk that one takes expecting returns but knowing it may fail to pay off. For an individual investor, it is always best not to buy shares on the actual IPO day. Get the shares later and leave that specific day for institutional investors.

Warren Buffet is steering clear of the Uber stock and says that he rarely buys into IPOs

The fact that the company has been registering serious losses (to the tune of $1 billion) annually has also been a source of great concern. Will Uber’s shares be really profitable? The company, in its S-1 filing, admitted that it may just never be profitable. Why then, are investors still pouring money into it?

Most of them are in it for the long term. According to most analysts, investors are going in not thinking of the ride-hailing services, but others such as UberEats and UberFreight. While its umbrella company was making hefty losses, UberEats made $1.5 billion last year. So overall, investing in the company seems really plausible.

While its umbrella company was making hefty losses, UberEats made $1.5 billion last year

And despite the IPO being a flop on many accounts, this isn’t to say that it didn’t make money for its investors. The company’s founders along with its earliest investors can smile all the way to the bank to check on their handsome returns.