NEW YORK: Uber Technologies Inc priced its initial public offering on Thursday at the low end of its targeted range to raise $8.1 billion, adopting a risk-averse stance toward the most high-profile U.S. listing since Facebook Inc seven years ago.
Uber’s IPO came against a backdrop of turbulent financial markets, fueled by the trade dispute between the United States and China, as well as the plunging share price of its U.S. rival Lyft Inc. It assigns a valuation to Uber of $82.4 billion, significantly less than the valuation of up to $120 billion that its investment bankers predicted last year.
The IPO was oversubscribed, but Uber settled for a lower price to avoid a repeat of Lyft’s IPO in late March, which priced strongly but was followed by a plunge in the company’s shares. Uber also wanted to accommodate big mutual funds, which unlike hedge funds put in orders for a lower price.
Lyft’s stock slumped nearly 11 percent on Wednesday to a record closing low of $52.91, well below the $72 per share IPO price, after the ride-hailing company reported a $1.1 billion quarterly loss.
Uber said it priced its IPO at $45 per share, toward the bottom end of its $44-$50 per share price range.
Some still consider the stock overpriced.
“Uber is basically Lyft 2.0. Good model, growing sales. But, yet again, here comes California math once more. It is still losing a ton of money,” said Brian Hamilton, a tech entrepreneur and founder of data firm Sageworks. “If you buy, you are buying a bull market, not a company,” he added.
In meetings with potential investors the past two weeks, Uber’s chief executive, Dara Khosrowshahi, argued that Uber’s future was not as a ride-hailing company, but as a wide technology platform shaping logistics and transportation.
The company is hoping this pitch, coupled with any fear of missing out what is expected to be the biggest IPO of 2019, will support demand.
The IPO pricing is a balancing act for Uber’s team of underwriting banks, led by Morgan Stanley, Goldman Sachs & Co and Bank of America Merrill Lynch, to negotiate a good price while leaving some upside to ensure the stock trades up on its market debut.
Uber lost $3.03 billion in 2018 from operations, and reported a net loss attributable to the company for the first quarter of 2019 of around $1 billion on revenues of roughly $3 billion.
