UBER Financial Planning Before IPO: All You Need to Know
2019 has come up as one of the biggest years for tech IPOs. Several tech companies have gone public with billion-dollar valuations. Therefore, it is also being called the year of unicorns and have become one of the trending topic discussions.
As a matter of fact, UBER is a company that has come under the limelight after releasing its long-awaited IPO prospectus. It is an American multinational transportation network company that offers various popular services like ride service hailing, peer-to-peer ridesharing, a bicycle-sharing system, and food delivery services.
There had already been a lot of fanfare surrounding Uber’s IPO. As per a report, UBER filed their IPO Paperwork with the U.S. Securities and Exchange Commission in early December, keeping it confidential from the public. And it finally went public in May 2019 with a $82.4 billion valuation.
Let us have a closer look at the frame-work created before the UBER IPO filing.
Projected Revenue and Users Of the Year 2018 – UBER IPO
UBER presented a report stating the total revenue of $7.93 billion in 2017. The figure reached $11.27 billion in 2018.
Net Income Of The Year 2018
The net income was reported as $997 million as of the year 2018. However, an adjusted $1.85 billion EBITDA loss was also registered for the company.
As per the UBER IPO report, its “MAPC” or “Monthly Active Platform Consumers” numbers was approximately 91 million by the fourth quarter of 2018. These users normally consist of those who take at least one meal on UberEats and one ride on Uber. If compared to the year 2017, MAPC has increased by 35%, showing signs of high growth year-to-year.
Number Of Trips
By the fourth quarter of 2018, UBER reported about 1.49 billion trips. A separate figure was also reported by UberPool riders (even if they share the ride in the same vehicle). In 2017, this figure was about 1.09 billion (total trips).
As mentioned in the UBER IPO report, in the fourth quarter of 2018, the company reported gross bookings of $11.48 billion.
If compared to the previous year’s data, this equates to a rise of $9.19 billion. Gross bookings are the full dollar value of an Uber Eats delivery, Uber ride, or the amount paid by shippers on Uber freight.
Major Shareholders – As Per The UBER IPO Filing
Here is a glimpse of the statistical report written by Stephen Grocer, who is the DealBook Editor of the New York Times. The report presented by him covered the most significant shareholders, as mentioned in the UBER IPO Filing.
SB Cayman 2
The owner of the SoftBank Vision Fund – SB Cayman 2, is the largest stakeholder as per the UBER IPO filing. UBER announced that SB Cayman 2 holds more than 222 million shares, which represented a total stake of 16.3%.
The next-highest stake with 150 million shares associated with the UBER is owned by Benchmark Capital Partners (Matt Cohler), representing a total stake of 11%.
Former-CEO and Uber’s ousted co-founder owns 117.5 million shares of Uber. He is the company’s third-largest individual shareholder holding a stake of 8.6% according to UBER IPO filing.
A report says that Kalanick would be listed among the world’s top-200 richest people after UBER company goes public, as it was estimated that its stake value could reach close to $9 billion.
He is the original founder of UBER, who created the application and Kalanick invested in the idea (second CEO, as mentioned above).
Camp holds 6% of the company’s share with around 82 million shares. After the UBER IPO, his estimated worth is considered to be approximately $6 billion.
H.E. Yasir Al-Rumayyan
As per the UBER IPO filing, Al-Rumayyan who is the managing director of the Saudi Arabia Public Investment Fund, owns nearly 73 million shares(72,963,000) of Uber or around 5.4% of the company’s share.
He invested around $3.5 billion in Uber in 2016, and after the IPO, the stake value is estimated to be approximately $5 billion.
The very first employee of the company is Ryan Graves, who grabbed the job by answering a tweet.
Further, Kalanick CEO, (for a brief time in the year 2010) took a followup with him, and as a result, Ryan Graves served as a Senior Vice President of Global Operations.
It was stated in the UBER IPO filing that he owned approximately 33.2 million shares, which makes around a total of 2.4% of the company. This estimated worth after the UBER IPO was predicted as $2.5 billion.
Saudi Arabia’s Public Investment Fund
Saudi Arabia’s sovereign wealth fund, which is the Public Investment Fund, holds 5.3% of the company’s total share i.e., around 72.8 million shares(72,963,000).
Initially, the Public Investment Fund made the investment of around $3.5 billion in a Series G. As per separate study, it was considered as one of the most substantial single investments from a foreign government to a business being financed by venture capital (venture-backed startup).
Another sizable stake in UBER is held by Alphabet. Based on Uber’s IPO prospectus, Entities, connected with the company, holds a considerable percentage of 5.2% with over 71 million shares. It is even claimed that Google parent Alphabet turned a large profit from its Uber investment.
There are several other investors like First Round Capital, who hold a minimum percentage. It invested around $1.3 million into Uber in 2010 as the first/early first VC backer of the company. Thus, we can conclude that not everyone got a large piece of the pie.
Uber disclosed more details in the UBER IPO Prospectus concerning its reward program. It is primarily for drivers who have contributed significantly towards the growth of the company.
- It is stated that drivers in the U.S. would get reward price ranging from $100 to $10,000, depending upon the total number of trips (all the completed lifetime trips).
- The rewards will be given according to the completion rate calculated by April 7, 2019. They will get $100 on the completion of 2,500 trips, $500 on 5,000, $1,000 on 10,000 and $10,000 on completing 20,000 trips.
- Drivers meeting the same criteria outside of the U.S are eligible for a similar rewarding system. However, it varies on a regional basis concerning the account discrepancies in average hourly earnings.
Risk Factors Involved In UBER IPO
There were various risk factors reported in UBER IPO prospectus that could adversely affect business. Here is a brief description of the significant risks involved in the venture.
Driver Employment Status
UBER considered keeping their drivers satisfied with their earnings as a secret key to their success.
They preferred to deal with their drivers as independent contractors instead of classifying them as employees.
If done so, it may put an adverse impact on the overall business, as UBER has stated.
UBER analyzed the level of intense competition in the market and considered it as one of the risk factors.
In UBER’s IPO prospectus, it was mentioned that to stay ahead of the competition, the companyh has not only decided to lower its rates, but provided more elevated incentives for both drivers & consumers.
UBER also predicted that other successful commercial autonomous vehicles might beat it as per the current scenario.
UBER is expecting that it’s operating expenses will significantly increase in the foreseeable future.
The company also adverted in its risk factors to the negative branding or notable media coverage in the year 2017, under former CEO Kalanick. It even replicated the failure of protecting the brand’s image and reputation, as per the UBER IPO filing.
Therefore, it is one of the unavoidable risk factors considered in the filing so far, which may cause the business to suffer.
UBER even mentioned the criminal inquiries & ongoing investigations that are being conducted by the U.S. Department of Justice.
This also included the cases that are being conducted by domestic and foreign agencies. As an example, UBER IPO filing mentioned the 2016 case for breaching the consumer data.
Uber announced that the Competition and Consumer Commission, in Singapore, concluded its procurement of violated local competition laws and imposed restrictions & hefty fines on both the companies.
UBER also acknowledged that restrictions on its service by government entities might also impact its business.
It highlighted the fact that in large metropolitan areas, a notable percentage of its gross bookings are mostly from and to airports.
Filing considered a case; if certain jurisdictions put restrictions or block UBER’s service, the business would be adversely affected.
UBER’s IPO filing report also mentioned that the business has already faced restrictions on its dockless e-scooters and e-bikes in some municipalities like California, Santa Monica, Texas, and Austin.
Injury Or Death
UBER IPO filing considered injury and death of the customers using its services or newer mobility products as severe and significant risk factors. The filing highlighted the reason as carelessness & inexperience handling of these new services of UBER.
These new products tend to expose the company to more exceeding liabilities since consumers may have to face more severe injuries by using a scooter instead of a vehicle if any accident occurs.
Know-How UBER IPO Is Performing
Figures presented in the IPO filing itself revealed the fact that UBER IPO would be one of the largest IPOs in tech-industry history.
Regardless of the numbers, UBER IPO has come up as the worst-performing IPO in U.S. Stock Market history. It is a piece of sad news for tech startups, but it is true!
The ride-hailing unicorn giant’s first day of trading on the New York Stock Exchange started with a drop from its IPO Price of $45. It’s stock then shot down 7.62 percent. Once UBER business successfully raised around $25 billion, after it’s IPO, it lost a significant portion of it.
As per Jay Ritter, a professor at the University of Florida, a decline of 7.62% since hitting the New York Stock Exchange makes it “more consequential than first-day dollar losses of any IPO in the U.S. history back through 1975.
The mind-boggling valuation of the company, including companies outside the U.S., took UBER IPO amongst the top 10 IPOs.
However, in terms of percentage losses, a single-digit decline followed in an estimated paper loss of $618 million. The loss is collectively logged by the potential investors who bought the 180 million shares at $45 per share, as offered through the UBER IPO.
The sell-off came as President Donald Trump intensified the trade war with China. He boosted tariffs on some $200 billion worth of goods, and the rising percentage is heightened to 10% to 25 %.
The investors are still somewhat jittery about Uber since its rival also had another IPO – Lyft. The competitor’s ride-hailing company’s shares also fell 35% since its debut in April. This defensive position did little to keep up Uber investors to deal with the game-changing UBER IPO results.
People tend to exaggerate & draw conclusions about the future of a company based on events like the company’s IPO price and its consequences as a first-day performance or first day of trading. On this, some of the experts/analysts commented that the company might be profitable by the year 2024.
However, the value of the company will be examined by factors like whether the company can keep growing market share in the ride-hailing business or other areas like freight & food delivery. The future of US public markets will also determine the company’s worth amid ongoing tensions with China.
By now, you might be able to put together all the facts about UBER’s IPO. After the curtain has dropped down, you might have realized that the company almost sank at the opening of trading, and fallen as much as 8.8%. In short, the IPO price of $45 per share has dropped down to $41.57. And the promise of a $120 billion Uber IPO just evaporated in a glimpse.
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