Uber is intended to hit the stock market at a valuation of $82.4bn. Here’s a few things to keep in mind:
The target valuation was initially $100bn, but since Lyft was introduced on the stock market on March 28 and lost already 27% of its initial valuation, Uber had to be more conservative.
Uber never made a dollar of profit since its launch 10 years ago (just last year its net income was negative $1.8bn).
All the scandals about the toxic culture at Uber under CEO Travis Kalanick leadership haven’t been much of the concern for the IPO.
The recent strikes of both Lyft and Uber drivers have had few (if any) impact as well.
The big winners right after the IPO will be Softbank Vision Fund (the investment branch of the Japanese Softbank conglomerate), Benchmark (based in San Francisco and one of the few private venture capital firm making real money on the planet), and Alphabet (Google’s mothership)…
But also The Public Investment Fund of Saudi Arabia!
The money from Saudi Arabia flowing in the Silicon Valley made a lot of wave a few months ago. And, then no one spoke about it ever again.
What to make of all this?
Essentially just remember that all what is happening around Uber’s IPO, its stock price, and how it will evolve in the next months has nothing to do with the quality of the company’s business model. This is about betting against the stock market expectations.
The immense amount of money that will collectively fluctuate in the next days and hours is connected to the fluctuation of this same amount of money. The stock market is a syllogism. Money mirroring itself and trying to anticipate how it will move, to move before itself. I’m not sure everyone gets the irony of Apple as one of the biggest market capitalization the planet, having its headquarters in a street called Infinite Loop.
An excellent article from Recode on the role and power of Softbank in the current configuration of the Silicon Valley.
EDIT December 20, 2019
As discussed in this article from mid-2019, Uber’s IPO is not only an acid test on the market’s trust in Uber, but More importantly on US « tech ». While in late 2018, Uber’s IPO was set for an expected $120 billion valuation, it instead landed at a meager $75.46 billion.
After this article was written, their stock went even further down to their current $52 billion (with a low point in Nov. 2019 at less than $45 billion). We also saw how the Aramco’s IPO was botched by the Saudis themselves and how Softbank’s Vision Fund nearly exploded with the WeWork disaster.
So yes, this is the assessment I was expecting and predicting on US tech for the last 2 years. The next question is: how will Europe adjust and are we finally going to shackle out of our Silicon Valley envy, to shape up as the second tech power on the planet (after China)?