Second Out the Blocks: Uber announces its $120 billion IPO shortly after rival Lyft goes public

April 23, 2019

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2 min read

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What's going on here?

Uber has filed the paperwork for its initial public offering (IPO) and will trade on the New York Stock Exchange around 10th May with the aim of raising $10 billion from its IPO.

What does this mean?

Shortly after its ridesharing competitor Lyft went public, Uber has decided that it wants to raise capital and boost its reputation with its own IPO in May. But beware! Lyft (who succeeded in raising $2 billion from its IPO last month) has seen its share price drop off from the over-hyped issue price of $72. Uber’s IPO may suffer from the same bubble with the likes of Goldman Sachs and Morgan Stanley vamping up anticipation that Uber could reach a valuation of $120 billion. Recently, Uber has taken heavy losses but CEO Dara Khosrowshahi explained in its IPO prospectus: “We will not shy away from making short-term financial sacrifices where we see clear long-term benefits”. The key benefits that Mr Khosrowshahi is talking about are Uber’s investment in self-driving cars, expanding into other sectors (e.g. Uber Eats) and solving its legal troubles and battles with regulators.

What's the big picture effect?

Uber is seeking to diversify its offering and distinguish itself from the likes of Lyft, which has clearly defined itself solely as a ridesharing service. The challenges that it faces lies primarily in its struggle to combat a long list of legal troubles. Amongst its resolved disputes is Uber’s success in being re-granted a licence to operate in London, following public safety concerns and poor compliance with regulators. The company also recently settled a lawsuit with Waymo (the self-driving technology company owned by Alphabet) for $245 million (paid in Uber stock). Beyond this, Uber has paid around $10 million to resolve discrimination claims and $1.9 million for harassment claims which have damaged its reputation. But with plans to launch itself into seven completely different sectors, the hope is that an IPO may refresh its image.

American law firm Cooley (based in the US technology hub of Palo Alto) is leading on Uber’s IPO, with Covington & Burling acting as special counsel on certain matters. Davis Polk represents the underwriters. Cooley has a trusted partnership with Uber, having worked on the company’s $3.4 billion deal with Yandex and the $8 billion investment in Uber led by Softbank. But getting this IPO right is vital for Uber’s success against rivals such as Lyft. Uber must also keep an eye on its international competitors like DidiChuxing (China-based competitor), OlaCabs (India-based competitor) and GrabTaxi (Singapore-based competitor), which will be considering similar moves.

The fundamental question remains: Can Uber succeed at living up to the current hype around its IPO?

Report written by Will H

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