Is Uber Worth $ 100 Billion?



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Everything about Uber is a lot.

Tax and delivery service is the largest venture-backed venture in America.

It is expected to collect $ 10 billion ($ 7.6 billion) when it will sell its shares on the New York Stock Exchange – one of the largest amounts recorded.

And the 10-year-old company could value as much as $ 100 billion when it floats.

Another important thing about Uber is its losses, which, although they were lower than a year earlier, reached $ 3 billion in 2018.

And this raises the biggest point – when will Uber make a profit and perhaps justify such a large market valuation?

This is a question that the head of Uber's Dara Khosrowshahi will face in the next few weeks when he goes to the traveling exhibition to visit potential investors before the flotation, which is expected in May.

What kind of reception will Uber get?

Uber is not the first to swim this year.

Of the so-called unicorns-backed venture capital companies worth $ 1 billion or more, at the end of March, the closest US rival Lyft was running, while Pinterest announced its shares next week.

But so far, these first public offers (IPOs) have shown that there is prudence in the valuation. Lyft's share price dropped by 15.2% since it fluctuated.

Pinterest valued its shares between $ 15 and $ 17, up to $ 11.3 billion. However, this is still below the $ 12 billion value that the company had before the last private funding cycle two years ago.

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Uber's CEO Dara Khosrowshahi will soon face potential shareholders

Will Uber be able to achieve an estimated $ 100 billion in this regard?

Kathleen Smith of Renaissance Capital says: "I think they are sometimes a bit deaf because they were in a world where everyone climbed up to invest in their businesses.

"They think then," oh, that means they'll roll out a red carpet on public markets "- and that's not the place."

When will Uber make a profit?

It is unlikely that the company will soon earn some money.

"From the beginning, we have had huge losses, including in the United States and other major markets," he said. "We expect that our operating costs will increase significantly in the near future and we may not achieve profitability."

It expects that losses in the near future will continue due to higher investments in areas such as increasing the use of its applications, expanding to new markets and continuing the development of an independent automotive division.

In a letter to potential shareholders, Mr Khosrowshahi said: "We will not avoid short-term financial sacrifices where we see clear long-term benefits."

Jordan Stuart, from Federated Investors Inc., says investors are willing to be patient when it comes to profits, but only if the company can explain how it intends to get there.

For example, Amazon did not generate annual profits until six years after the flotation in 1997. It was already necessary until investors saw a sustainable path to profitability.

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Image caption

Lyft celebrated with the start of trading, but the price since then fell by more than 15%

Mr Stuart said: "The situation really moved five or six years ago when we really could show" hey, we can turn off investments to show profitability if we want, and we abandon growth in the growth line, but we will not do it .

"Some of these companies, if they can show this flexibility, the ability to turn on or off the nozzle for profit, then I think investors … will give companies the ability to say" this It is worth billions of dollars. " "

Uber's sales are rising. Revenue rose from $ 3.8 billion in 2016 to $ 11.2 billion in 2018.

Gross provisions from Uber's core business, which account for most of the sales, jumped from $ 18.8 billion in 2016 to $ 41.5 billion last year.

In her role, Uber says she expects people to distance themselves from the cost of owning a car to use the services they are moving.

Uber also invests in e-bikes and e-scooters, hoping to capture customers who make shorter journeys.

However, investors want to see a plan.

Mr Stuart said, "I believe." [investors] you've raised the line and said, "We will no longer look at clicks or eyes or users unless you can show us where this return is." "

What do the Uber IPO documents reveal?

Dan Ives, General Manager and Wedbush Securities analyst, said that investing IPO applications in the company was the first time that people could "really understand financial matters" under the heading Uber.

However, there are some worrying areas.

A company in the US and Canada does not appear to have recovered from the #DeleteUber campaign in 2017 – which was not this year for the company – first inspired by the assertion that Uber tried to break the taxi that was triggered by taxis drivers in New York .

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Hetag then reappeared on social media when former Uber engineer Susan Fowler wrote a blog that presumed the poisonous working environment of the company.

Uber said that "our position in the field of reflection in 2018 in most of the regions in which we operate, partially reduced, has greatly reduced due to the large subsidies and discounts of our competitors in different markets."

Another possible concern is the employment status of Uber drivers. They are classified as independent contractors, but Uber still faces legal issues in this regard, and if employees are treated as employees, Uber could face higher costs.

What now for Ubera?

Uber did not specify the price at which it will sell its shares – this is something that will need to be determined in the coming weeks when Mr. Khosrowshahi meets potential investors.

"Many investors in technology are looking for the next FAANG," said Ives, referring to the acronym for Facebook, Amazon, Apple, Netflix and Alphabet, which is the parent company of Google.

But Mrs Smith said: "In light of the fact that we saw Lyft and its very bad trading, and after we see what Pinterest does, it tells me that investors may have been a little more" waiting and seeing "about Uber."

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