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I'm baffled that this company as of October is targeting a $120B IPO valuation [1]. I'm assuming there are institutional buyers out there at this price as the a

I'm baffled that this company as of October is targeting a $120B IPO valuation [1]. I'm assuming there are institutional buyers out there at this price as the article says banks advised them on this number. It would be one thing if the prospects for Uber converting revenue to its bottom line were great, but margins are shrinking. The CEO admits "we're in a big battle" with Lyft and more competitors are coming. Waymo will be all over the news next month [2]. IPOing in this environment - at least at a valuation 1.6x its last round [3] - seems difficult. [1] - https://www.theguardian.com/technology/2018/oct/16/uber-targets-120bn-valuation-2019-flotation-report https://www.theguardian.com/technology/2018/oct/16/uber-targ... [2] - https://www.bloomberg.com/news/articles/2018-11-13/waymo-to-start-first-driverless-car-service-next-month https://www.bloomberg.com/news/articles/2018-11-13/waymo-to-... [3] - https://www.cnbc.com/2018/08/27/toyota-to-invest-500-million-in-uber-at-a-valuation-of-72b-wsj.html https://www.cnbc.com/2018/08/27/toyota-to-invest-500-million...

adjkant 8y ago
An IPO, no matter the climate, is the only way anyone gets their money even half back. If they wait, they will simply burn even more money and likely face an even worse climate as their business model is exposed more and more as unviable. Not that I would go near Uber with a 10 foot pole, but if I had money in this and didn't care about anything else, IPO ASAP would be my call.
- Donzo 8y ago
  How does Uber burn so much money? Isn't it a fundamentally profitable enterprise? Aren't they just skimming off contractors' wear-and-tear? Won't they eventually hit a point where they promote their product less aggressively and generate significant revenue off the massive ride-sharing network that they've established?
  - SXX 8y ago
    They burn money to expand on markets where they still have competition from conventional cab companies or local competitors who come to market earlier. And they also tend to buy or sell into partnership in case they lost battle for said market like in middle-east Asia or Russia. As for large network effect this is my layman talking, but it's only important on markets with highly mobile population like US or EU. Problem of Uber is that high percentage of population in many countries rarely travel outside of their city, region or country. While you travel a lot Uber is great: you arrive and it's working almost everywhere, but if you stay within borders of your home city 95% of time you can as well use some NotUber app instead if you like it more of it cheaper.
    - rhacker 8y ago
      Just curious. I don't have TV so I don't have commercials, but are they like, advertising on TV or something, or is it more like, they fly into whatever city isn't using them, order up a bunch of cab rides, and tell the driver to work for them?
      - dkasper 8y ago
        Some of both but mostly incentives to the drivers and riders, for example new driver bonuses are definitely not profit.
      - JohnWatsman 8y ago
        I know this comment risks coming off as snarky, but I mean it genuinely: Do you honestly believe the only advertising channels that exist are TV and in person? Is it possible someone on a tech-oriented site is this unaware of the advertising arena?
        rhacker 8y ago
        Lol, I honestly have never seen an ad for Uber in any website I have ever visited. They are, however talked about and recommended by everyone. So I am seriously curious where they are actually advertising.
      - SXX 8y ago
        When they initially arrived to Russia they paid for quite a lot of offline ads space all around the city and I suppose their ads was there for at least a year. I don't watch TV for last 12 years so have no clue if there was any ads there. And since back then we already had multiple taxi services (mostly without mobile apps though) with quite low price they likely spend a lot on underbidding them.
- adtac 8y ago
  So the moment an IPO happens each investor is going to dump their stock? That's probably a great short opportunity right?
  - hammock 8y ago
    Would have to be naked shorts. Check out Groupon's IPO.
  - ajcodez 8y ago
    Not on day 1 ... but day 2 should be fine.
sonnyblarney 8y ago
As adjkant pointed out - it's 'better now than later' in many scenarios. Also - Uber might be doing some big write-offs and dumping the ugliness of their spreadsheets now rather than later. Basically they get rid of as much toxicity as early as possible, so the road to the IPO is more roses. New CEO's often do that, dump the crap right away the first quarter they are there, so it can be written off as 'restructuring' by analysts. Uber does in fact have a new-ish CEO, maybe it's a little late for this, but not too late maybe.
fullshark 8y ago
There are public investors that want a piece of Uber at basically any price. When the upside is ownership of a worldwide ride hailing network, there will be no shortage of interest.
malandrew 8y ago
It's quite simple really. You haven't seen the numbers the investors have seen. I used to work in the private capital markets and it was awesome to be privvy to information that gave you more insight than can be gleaned from the outside.
- lechiffre10 8y ago
  Like the numbers investors saw for Snap before it’s IPO and it’s not doing so well right now. This 120B valuation doesn’t make sense regardless of the numbers. Especially considering they just did a bond sale with an 8% coupon. What company worth 120B sales bonds with an 8% coupon? Absurd tech bubble with ridiculously valued “unicorns”
  - malandrew 8y ago
    8% on an 8 year coupon for $1.5B sounds like a heck of a deal for a growth company relative to raising another round. That's just around $2.8B paid back 8 years from now. If the company modestly triples from their current value over 8 years, that's a $1.7B savings.

adjkant 8y ago

An IPO, no matter the climate, is the only way anyone gets their money even half back. If they wait, they will simply burn even more money and likely face an even worse climate as their business model is exposed more and more as unviable. Not that I would go near Uber with a 10 foot pole, but if I had money in this and didn't care about anything else, IPO ASAP would be my call.

Donzo 8y ago
How does Uber burn so much money? Isn't it a fundamentally profitable enterprise? Aren't they just skimming off contractors' wear-and-tear? Won't they eventually hit a point where they promote their product less aggressively and generate significant revenue off the massive ride-sharing network that they've established?
- SXX 8y ago
  They burn money to expand on markets where they still have competition from conventional cab companies or local competitors who come to market earlier. And they also tend to buy or sell into partnership in case they lost battle for said market like in middle-east Asia or Russia. As for large network effect this is my layman talking, but it's only important on markets with highly mobile population like US or EU. Problem of Uber is that high percentage of population in many countries rarely travel outside of their city, region or country. While you travel a lot Uber is great: you arrive and it's working almost everywhere, but if you stay within borders of your home city 95% of time you can as well use some NotUber app instead if you like it more of it cheaper.
  - rhacker 8y ago
    Just curious. I don't have TV so I don't have commercials, but are they like, advertising on TV or something, or is it more like, they fly into whatever city isn't using them, order up a bunch of cab rides, and tell the driver to work for them?
    - dkasper 8y ago
      Some of both but mostly incentives to the drivers and riders, for example new driver bonuses are definitely not profit.
    - JohnWatsman 8y ago
      I know this comment risks coming off as snarky, but I mean it genuinely: Do you honestly believe the only advertising channels that exist are TV and in person? Is it possible someone on a tech-oriented site is this unaware of the advertising arena?
      - rhacker 8y ago
        Lol, I honestly have never seen an ad for Uber in any website I have ever visited. They are, however talked about and recommended by everyone. So I am seriously curious where they are actually advertising.
    - SXX 8y ago
      When they initially arrived to Russia they paid for quite a lot of offline ads space all around the city and I suppose their ads was there for at least a year. I don't watch TV for last 12 years so have no clue if there was any ads there. And since back then we already had multiple taxi services (mostly without mobile apps though) with quite low price they likely spend a lot on underbidding them.
adtac 8y ago
So the moment an IPO happens each investor is going to dump their stock? That's probably a great short opportunity right?
- hammock 8y ago
  Would have to be naked shorts. Check out Groupon's IPO.
- ajcodez 8y ago
  Not on day 1 ... but day 2 should be fine.

sonnyblarney 8y ago

As adjkant pointed out - it's 'better now than later' in many scenarios. Also - Uber might be doing some big write-offs and dumping the ugliness of their spreadsheets now rather than later. Basically they get rid of as much toxicity as early as possible, so the road to the IPO is more roses. New CEO's often do that, dump the crap right away the first quarter they are there, so it can be written off as 'restructuring' by analysts. Uber does in fact have a new-ish CEO, maybe it's a little late for this, but not too late maybe.

fullshark 8y ago

There are public investors that want a piece of Uber at basically any price. When the upside is ownership of a worldwide ride hailing network, there will be no shortage of interest.

malandrew 8y ago

It's quite simple really. You haven't seen the numbers the investors have seen. I used to work in the private capital markets and it was awesome to be privvy to information that gave you more insight than can be gleaned from the outside.

lechiffre10 8y ago
Like the numbers investors saw for Snap before it’s IPO and it’s not doing so well right now. This 120B valuation doesn’t make sense regardless of the numbers. Especially considering they just did a bond sale with an 8% coupon. What company worth 120B sales bonds with an 8% coupon? Absurd tech bubble with ridiculously valued “unicorns”
- malandrew 8y ago
  8% on an 8 year coupon for $1.5B sounds like a heck of a deal for a growth company relative to raising another round. That's just around $2.8B paid back 8 years from now. If the company modestly triples from their current value over 8 years, that's a $1.7B savings.