Uber reveals strong growth, huge losses ahead of IPO
Uber is providing a look under the hood of its business in the lead-up to its hotly anticipated debut on the stock market, revealing strong growth but still struggling to overcome huge losses.
Documents released Thursday offered the most detailed view of the world’s largest ride-hailing service since its inception a decade ago. The unveiling comes four months after Uber took its first step toward its initial public offering with a confidential filing.
The massive filing shows Uber has been generating the robust revenue growth that entices investors, but also racked up nearly $8 billion in losses over its 10 years in existence, which mirrors the same trend challenging Lyft, Uber’s main rival in the U.S.
Uber’s revenue totaled $11.3 billion in 2018, a 42% increase from $7.9 billion in 2017, and a giant leap from $495 million in 2014.
The company posted a profit of $997 million last year, but that doesn’t mean its ride-hailing service suddenly started to make money – far from it. The positive result stemmed from a windfall that Uber generated from the sale of its operations in Russia and Southeast Asia. The company said it sustained an operating loss of $3 billion.
Reaching profitability has proven to be a challenge for both Uber and Lyft. Paying drivers is a huge expense, and Uber’s fierce competition with Lyft for customers has led both companies to offer rides below cost. Drivers for both companies complain about declining wages, and they can easily switch between platforms, making it difficult for either company to further reduce driver costs and keep fares cheap for passengers.
That unprofitable history may force Uber to eventually raise its ride-hailing prices unless it can reduce its costs by shifting to driverless cars or expand into other markets and lines of business.
Lyft beat Uber to the stock market last month with an IPO that raised $2.3 billion, but its shares have been backsliding after an early run-up. Lyft’s stock currently is hovering around $61, down from its IPO price of $72.
The rocky start may have prompted Uber to tamp down its IPO ambitions. The company is expected to try to raise roughly $10 billion and seeks a market value of $90 billion to $100 billion, according to the Wall Street Journal. That’s below earlier estimates of $120 billion.
In its last private funding round in 2018, Uber was valued at $72 billion, according to SharesPost analyst Alejandro Ortiz.
The investment bankers handling Uber’s IPO are expected to reveal a pricing range for Uber’s shares later this month before heading into a so-called road show designed to drum up interest in the IPO among institutional investors who will be given the first opportunity to buy the stock before it begins trading on the New York Stock Exchange next month.
The per-share numbers will determine Uber’s market value.
In the end, Uber is widely expected to be the biggest technology IPO since Chinese e-commerce giant Alibaba Group went public in 2014. And it’s likely to be the largest among U.S. tech companies since Facebook took its bow on Wall Street seven years ago at a time when most people hadn’t ever considered using an app on their smartphone to summon a ride from strangers driving their own cars.
Uber launched in 2009 as UberCab, as a black car service where customers could hail professional drivers with a few taps on a smartphone. It shortened its name to Uber in 2010, distancing itself from the taxicab industry, which has criticized the company for facing less regulation than the traditional taxi industry.
The company operates in 65 countries and has completed 10 billion trips worldwide.
Uber is also expanding in other markets such as food delivery and freight while offering other ways to get around with shared scooters and bikes.
But Uber faces other challenges that Lyft doesn’t because of a series of damaging revelations that sullied its reputation among consumers. The setbacks have included rampant internal sexual harassment and allegations it stole self-driving car technology.
The blowback from the problems helped Lyft pick up ground in the U.S. and led to the ouster of Uber co-founder Travis Kalanick as CEO in 2017. Now it will be up to Kalanick’s successor, Dara Khosrowshahi, to persuade investors that Uber has cleaned up its act and merits a market value higher than Ford Motor and General Motors combined.
Kalanick is one of Uber’s largest shareholders, owning nearly 9% of the company’s stock.
Alphabet, the parent company of Google, owns 5% of Uber, even as it competes with Uber on self-driving technology. Alphabet also owns roughly 5% of Lyft’s stock.
Cayman, a subsidiary of Softbank, is Uber’s largest shareholder with 16%. Yasir Al-Rumayyan, the managing director of Saudi Arabia’s public investment fund, is listed as holding 5.4%.