According to reports issued on Wednesday the bar has just been lowered for Uber’s long awaited IPO. The ride hailing powerhouse is set to announce the pricing of its IPO on Thursday, with trading set to begin on the New York Stock Exchange on Friday.
According to reports from the company on Wednesday afternoon Uber was set to price its IPO at or below the estimated target range of $44 to $50 USD per share. This range had already been lowered to less than previously expected, however a report from Bloomberg on Tuesday had mentioned that Uber had more than enough demand to price its initial public offering at the higher end of their target price range.
If we assume that Uber successfully launches their IPO at $47 USD per share, the companies full valuation would be in the region of $68 Billion USD which is almost half of the $120 Billion valuation that was previously estimated. A spokesperson from Uber has yet to comment on this unexpected drop in valuation. Just recently Uber has reportedly tried to reduce the expectation of its IPO with signals of the market showing less favor to a new entrant, especially one that has such a high valuation like Uber. Unfortunately for the company their IPO has come at a time where this week has seen a sudden pull back in that markets, and an extremely underwhelming public offering by their direct competition Lyft. These factors alone are probably enough to have caused the decision by Uber and their IPO underwriters to try to temper investors high expectations heading towards the latest in IPO’s.
Wedbush analyst Dan Ives wrote in a note to investors onWednesday “We continue to view Lyft's stock performance and lack of disclosures going forward (bookings, take rates) as the 1-2 punch, which coupled with a choppy tech tape caused Uber to look at a more conservative price range based on its demand for its IPO, a prudent strategy in our opinion coming out of the box.”
While the expectations for this IPO continue to flutter, Uber and Lyft drivers all over America have been holding protests and strikes in regards to the companies pay and labor policies, which has ultimately created even more negative impact surrounding the Uber IPO.
Lyft’s IPO is being used as a proxy for the expected performance of Uber given the duopoly of the sector with Uber controlling 67% of the US market share, and Lyft at a respectable 33%. Using these statistics the 26% decline in Lyft’s share price since their IPO has cast a very dark shadow over Ubers upcoming offering. “We continue to view Lyft as a one-trick pony domestic ride sharing player and ‘little brother’ to Uber, which has clearly established itself as the clear #1 player and in our opinion is paving a similar road to what Amazon did to transform retail/e-commerce and Facebook did for social media,” Dan Ives said to finish his interview.
Sandra Chow – AMT Associates