Everything You Need to Know About Uber before Trading on the Stock Exchange
This Friday Uber has decided to take a gigantic step in its vision to become the largest technology company in the segment of the ‘unicorns' that manages to impact its output to the stock market, as they did in a recent past Alibaba and Facebook.
Wall Street will undoubtedly witness one of the most anticipated investment events of the year since its intention to go public was announced by the largest car-sharing company in the world.
Although there are serious doubts about its performance in recent years and the feasibility or not of profitability in its shares after its IPO, it is worth remembering how the company came to this moment and what kindnesses and weaknesses it has as a listed company. , in order that its investors see profitability in their bet capital.
Uber was born in 2009 by Garret Camp and Travis Kalanick, who decided at the beginning to finding UberCab, the need Camp had for the difficulty of getting a taxi in San Francisco.
The service originally started with the offer of black cars on request for well-heeled customers. In this way, it expanded rapidly and entered a significant number of cities and countries around the world. Five years after launching the service, passengers had requested a billion trips, and Uber had already become a symbol of the revolution in the transport services market.
Currently, Uber is a global company and its demand for services from the company is growing. As a result of its growth, due to the impetuosity of covering markets and innovating, it has generated a series of conflicts in various cities, with sectors of taxis, legislators, and regulators in many cities worldwide.
Also in 2017, the company was immersed in a series of ethical and legal scandals about discriminatory practices, which led to the departure of its founder Kalanick.
For many investors who decide to bet capital on a company, the first question is whether the company is profitable.
In view of the failure of its closest competitor, Lyft, after its IPO at the end of March of this year, we bring to the table a series of figures that can help us understand how Uber is doing at this moment when quoting on the Stock Exchange.
- Uber's gross reserves have been increasing. That is, the number of Uber users who spent on the application grew by 2018 by 44% compared to the previous year.
- Uber obtained a turnover of 11270 million dollars, with a net profit of 997 million dollars. Its revenue growth has slowed down, given that revenues in 2017 had more than doubled compared to 2016.
- In addition, spending continues to increase and reached $ 14,300 million last year, which means an increase of 19 percent since 2017.
- The net loss margin has decreased from 131.9% in 2014 to 25.8% in 2018.
- Uber has had slow growth and begins to level after its explosion in 2017. By 2018, the number of monthly users increased by 34 percent compared to the previous year. For 2017, this same number increased 51 percent.
- Uber Eats tripled revenues from 587 million dollars in 2017 to 1,500 million dollars in 2018.
While its macro numbers are somewhat uncertain and not entirely optimistic, Uber has a great advantage over its closest competitor Lyft, as it is a global company that operates both in America and Europe and also its business is diversified beyond the simple transport service to scooters, bicycles, autonomous vehicles and recently delivery of courier and meals at home.
The Shadow Of Lyft.
As we have mentioned, the shadow of Lyft is a subject that is very worrying to investors, but Uber can perfectly make a difference and based mainly on its diversified range of services offered.
In addition, if we compare growth and performance data between the two companies we can find quite marked differences that are important to take into consideration.
- The US transportation giant has seen a very dynamic increase in revenues in recent years: 209% in 2017 and 142% in 2018. The rate of revenue growth slows, but it is still higher than the growth rate of operating costs, which leads to an improvement in margins.
- The gross margin increased from 21.6% in 2014 to 50.1% in 2018.
- In the case of Lyft, both the gross margin and the net loss margin were 42.3% in 2018. Uber continues to reduce losses over the years.
- Lyft had extraordinary compensation in actions due to the IPO for 1100 million dollars. Uber is estimated to be a figure of around 1850 million dollars, something that worries the market.
- In addition, the revenue from the provision of shared-trip services per driver in the Uber case was at the level of $ 2,354 in 2018, and for Lyft was $ 1,135.
- The raw data of reservation with the driver indicates us an image of 10,641 dollars for Uber and 4,263 dollars for Lyft “.
- The Lyft IPO on March 29 was seen by many as a prelude to the departure of Uber, larger and more awaited.
- Uber seems to be well positioned within the industry due to its wide geographical reach and its expanding offer. On the other hand, Lyft is operating only in the US market. And it's not even a leader there (Uber has a market share twice as big).
IPO- Price Of The Shares.
This 2019 promises to be the year of the IPOs. Already successful cases like Pinterest that has gained 60 percent since its release, Zoom with a value increase in more than double and PagerDuty with 90 percent, undoubtedly prepare an optimistic scenario for Uber despite the losses for more than 30 percent generated by his closest rival, Lyft.
The price of each share of Uber will be between 44 and 54 dollars and will be identified with the name UBER in the New York Stock Exchange, which is estimated to begin operations in mid-May. Finally, it has been adopted by a conservative strategy. The company will put a total of 207 million shares on the table and will have a lower valuation than previously.
The on-demand chauffeur company plans to raise around $ 9 billion in its initial public offering of shares.
It is expected to be valued between 80 billion and 91 billion dollars, considering options for the purchase of restricted stocks and shares. This figure is higher than the valuation of 76,000 million dollars given by private investors in August and eclipses rival Lyft, whose valuation was only 24 billion dollars.
Uber is located in the third box of the most valuable IPO in the United States, behind Alibaba in 2014 with 167 billion dollars and Facebook in 2012 with 104 billion dollars, hence its importance and impact on the markets.
Uber will leave three percent of its shares available for its drivers to agree to buy at the price of the initial public offering.
Uber at the time of going public, faces a great job challenge at its doorstep, with multiple protests in the United States and Europe from its drivers who demand labor benefits and the derogation of their status as a contractor, something that could cost the company billions of dollars in salary compensation.
In addition, the 32% decline in the price of Lyft, its closest competitor and point of reference for many because of the similarity of the companies hours before their departure, reflects the concern about Uber on the part of investors, about the ability or not of the company to be profitable.
For now, in the short term, it is more than evident that Uber and Lyft will not generate profits, more than their founders and investors in the years of initiation, given that the heavy investments that are being disbursed to diversify the business will not yet bear immediate fruits.
However, starting from the previous point, once Uber manages to consolidate and fight with the strong competition to enter the new business segments to which it is betting, they will perhaps allow to balance the scales and generate profit for both its employees and its investors.
In this regard, Uber is demonstrating to change its policy and be even more sincere with its employees, as The Wall Street Journal mentions, citing internal sources, where the company's employees have consulted their Chief Financial Officer about the feasibility of selling or to stay with the company's stock, which has left a neutral position beyond exhorting employees to keep their shares.
“Go talk to a financial advisor, that's a personal decision.”