Uber joins race to go public and sell stock
Revelation comes one day after Lyft reports its filing
And they’re off! In a race to go public on Wall Street, Uber has filed confidential papers for an initial public offering, according to the Wall Street Journal. The revelation comes a day after smaller ridehailing archrival Lyft announced that it had submitted its own confidential filing to the Securities and Exchange Commission for its own stock market debut.
“It sounds like Uber is trying to steal Lyft’s thunder,” said Matt Kennedy, senior IPO market strategist at Renaissance Capital, an institutional IPO research firm. “The first one to go to market will get more buzz and will set the valuation.”
Both companies evidently are rushing to sell shares to the public by April. Uber declined to comment on the report, a contrast to Lyft which put out a news release on Thursday about its SEC filing. The Journal said it is not clear when Uber submitted its filing. The confidential filing process allows companies to discuss financial disclosures with regulators before revealing them to potential investors, or withdraw an offering quietly.
“2019 is already shaping up to be a historic year for tech IPOs, particularly for Bay Area
companies,” Rohit Kulkarni, managing director and head of research at SharesPost, which helps arrange sales of private company stock, said in an email. “Uber could be the largest IPO for a U.S.based tech company ever, while Lyft could be among the top 10 in the history of IPOs of VC-backed companies.”
The two ride-hailing giants, both headquartered in San Francisco, are called “decacorns” by Silicon Valley insiders, a term for private companies worth more than $10 billion. The term comes from “unicorn,” a now-commonplace label for billiondollar startups.
Uber, with $22.2 billion in backing, is valued at $76 billion. Lyft, which has raised $4.9 billion, is valued at $15 billion. Uber could aim for a sale that values it at a jawdropping $120 billion, while Lyft could seek a valuation as high as $30 billion, according to reports.
Both companies lose money hand over fist — but because investors place a premium on growth prospects, that may not matter.
“Companies like this would not go public unless they had stellar growth numbers,” Kennedy said.
Uber has been taking the unusual step for a private company of divulging its financials. In the third quarter, it lost an adjusted $939 million on $2.95 billion in revenue. Both figures were up 38 percent from the previous year. In the same quarter, Lyft lost $254 million on $563 million in revenue, according to the Wall Street Journal. Its revenue for those three months, however, was up 88 percent over the same period last year.
The rivals have presented very different public images, and their twin debuts will give a chance to see how investors weigh corporate culture, said Max Wolff, a partner at Multivariate, which does consulting and merchant banking for emerging growth companies.
“They represent the two extremes of the cultural continuum in technology,” he said. “Lyft talks about being for profit but having a social mission. While Uber is different now under (CEO) Dara (Khosrowshahi), initially it was more of a frat party with venture funding.”
The two companies’ race to Wall Street could be spurred by investors who are eager to see paydays.
A year ago, Uber helped early investors and employees cash out some of their holdings via a deal with Japanese tech firm SoftBank, which invested $1 billion in Uber and bought billions more of stock from existing shareholders. Uber co-founder Travis Kalanick, ousted as CEO last year amid concerns he had fostered a sexist and lawless culture, reportedly made $1.4 billion in the deal.
Both companies are exploring modes of transportation beyond cars, such as bikes and scooters for rent. But Uber has a broad range of other business activities, including its Uber Eats restaurant delivery service and Uber Freight for trucking logistics.
Uber is far larger, operating in almost 70 countries, while Lyft’s operations are only in the U.S. and Canada. Uber has had to retrench some of its international operations, however, ceding markets in China, Russia and Southeast Asia to competitors. Uber has more than two-thirds of the U.S. market compared with Lyft’s 28 percent, the Journal said, citing credit card data.
Both companies just took a blow to their business model in New York, which is among their largest markets. On Tuesday, the city became the first in the U.S. to mandate pay rules for ride-hailing drivers. Regulators said companies must ensure that drivers make $17.22 an hour after expenses, something that advocates said would add $10,000 a year onto earnings.
“They’re going to have to
“It sounds like Uber is trying to steal Lyft’s thunder. The first one to go to market will get more buzz and will set the valuation.” Matt Kennedy, senior IPO market strategist at Renaissance Capital
talk about this (to potential investors) on the road,” Wolff said. “It will be fascinating to see if it’s a big deal to investors. There remain questions about whether their employment model is lawful.”
Uber and Lyft drivers are independent contractors, and the companies say that’s crucial to guarantee flexibility. But a recent California Supreme Court decision establishes new rules under which drivers potentially could be reclassified as employees, which could add 30 percent to labor costs.
Both Lyft and Uber are taking advantage of recently expanded securities laws that allow private companies to quietly test the waters with potential institutional investors and get feedback from regulators, free from public scrutiny.
Once either company is ready to actually debut, it must make the filings public at least 15 days before an investor roadshow — a series of meetings in which executives pitch their company to analysts, fund managers and potential investors. Roadshows typically conclude about two weeks before shares go on sale.