Uber IPO

Uber is expected to launch its initial public offering (IPO) in the next few months. Find out when it’s likely to happen, what the valuation could be when it arrives on the stock market, as well as why and how you could trade it.

Why trade Uber's IPO with IG?

  • Speculate on Uber

    Buy or sell based on your prediction of Uber’s market cap

  • Go long or short

    Leverage your exposure with CFD trading or spread betting

  • Buy Uber stock

    Invest in Uber with a share dealing account

How to trade the Uber IPO

You can trade Uber’s IPO in two ways:

  • Before the IPO, you can speculate on Uber’s share price via our grey market
  • After the IPO, you can trade on or invest in Uber shares

Before the IPO

As Uber prepares to list on the stock market, you can take a position on its potential market cap by trading our grey market. The price of our grey market is a prediction of what Uber’s total market capitalisation will be at the end of its first day of trading. If you think that Uber will be worth more than the price indicated, you can buy the market. If you think that the price is an overvaluation, you can sell.

After the IPO

Once Uber’s IPO is complete, we’ll add the company to our share trading service. This means you can go long or short on its stock via spread betting and CFD trading, or buy Uber stock outright via share dealing.

When is Uber’s IPO?

There’s currently no confirmed date for Uber’s IPO, but it’s likely that the company will list within the next year. Uber’s chief executive Dara Khosrowshahi has hinted that the IPO will happen by the second half of 2019.

Why is Uber launching an IPO?

Uber is launching an IPO because the board agrees that it’s time for the business to go public. This is a departure from the approach of previous CEO, Travis Kalanick, who tried to delay going public as long as possible. Current CEO, Dara Khosrowshahi, feels that Uber already has all the disadvantages of a being a public company – a reference to the negative media attention it has received due to its financial and legal battles – without being able to enjoy the advantages. There are of course great benefits in going public – primarily to raise capital to expand the business, instead of having to borrow the money. It can also help generate publicity and boost reputation. Khosrowshahi claims that the previous CEO is now fully on board with his IPO plans.

Who are Uber’s current investors?

Uber’s current investors are, among others, the Toyota Motor Company, Amazon founder and CEO Jeff Bezos, Fidelity Investments, SoftBank, Tencent Music, and dozens of other notable individuals and businesses. As of October 2018, Uber is funded by 96 different corporate and private investors and has raised more than $22 billion from its capital ventures and investors. This makes it the number-one rated unicorn (a private company valued at over $1 billion) in the world.

What is Uber likely to be valued at when it lists?

Uber could be valued at up to $120 billion when it lists – according to the banks Morgan Stanley and Goldman Sachs. This is $50 billion more than initially anticipated and would make it one of the biggest listings in history, even surpassing Facebook ($104 billion in 2012) and Google ($23 billion in 2004). It is, however, still a far cry from the hugest IPO giants of the tech world – Amazon and Apple – which both achieved trillion-dollar valuations.

If the ride-hailing app does indeed achieve $120 billion, this will put it at three times the value of traditional car manufacturer Ford, and over twice as much as electric car company Tesla. Competitor Lyft pales in comparison, with valuation estimations hovering at around $18 billion.

It is not yet known how many shares Uber will offer to the public, or at what price.

What’s the outlook for Uber?

Uber’s road to profitability has been a rocky one. Despite accumulating sales of $7.5 billion in 2017, it posted losses of $4.5 billion – and it has been hampered by setbacks such as the fatal collision of one of its driverless cars, and ongoing negative media attention on its company culture. It is also seeing increased competition from rivals such as Lyft, although the CEO seems confident that there is space for both in the marketplace.

However, many signs are pointing to the increasing success of Uber – not least it’s sky-high valuation. It turned its first profit in the first quarter of 2018, and the popularity of its ride-hailing app is continuing to grow. The new CEO is working hard to reinvent the brand’s image, and if investors trust the business model and see potential in the growth of the business, they are likely to take the risk of buying into the IPO. A lot of Uber’s future success depends on its ability to expand its offering – using its smart technology to further its transport offering and food delivery service and scale the business internationally.

What is Uber’s business model?

Uber’s business model is based on the aggregator approach, where passengers are connected to taxi cabs through an app. A passenger opens the app, enters their destination, and sees the approximate fare for their trip. If they agree to the price, the cab nearest to them will then be alerted to the passenger’s location and pick up the ‘call’. The cabs belong to the drivers contracted to Uber – not Uber itself – and the driver gets a portion of the fare. The strength of this business model lies in its innovative systems and infrastructure, and the demand for the service has proven that consumers believe in the brand.

How has Uber been performing?

Uber is considered something of corporate anomaly, having grown so fast yet lost so much money in a relatively short period of time. It has raised billions in capital and grown the business at an exponential rate since its launch in 2009. Although it is not yet a public company, it has recently started disclosing its earnings to reporters.

In 2017, Uber ran a loss in all four quarters: a $0.8 billion loss in Q1, a $1.1 billion loss in Q2, a $1.5 billion loss in Q3 and a $1.1 billion loss in Q4. In the first quarter of 2018, Uber finally turned a profit of $2.5 billion – thanks to deals made in southeast Asia and Russia – however, Q2 revealed another loss of $0.9 billion. Its CEO has said that Uber is willing to take these short-term losses because of the long-term growth potential.

Uber vs Lyft

Uber and its rival, Lyft, are both set to release their IPOs in 2019 – and may be racing to do so – but Lyft could beat Uber to market, as it is said to be planning its IPO for as early as March 2019. Dara Khosrowshahi said that he is not concerned about Lyft planning its IPO, as he believes there is enough public demand for both companies.

While there are many similarities between Uber and Lyft, Uber remains the bigger business – with a presence in more than 70 countries. Both ride-hailing companies compete heavily on pricing. They charge similarly per ride, often run the same promotions, and use price surging when demand increases. The apps also function similarly, and some riders normally just choose the service that’s closest to them (also keeping in mind that Lyft operates in fewer countries). Besides having the most coverage, Uber also has more ride options, from luxury vehicles to Uber vans. Lastly, Lyft has been valued at $18 billion to $30 billion, while Uber has a much larger expected market cap of $120 billion.

How do IPOs work?

IPOs come about when a company decides to start selling its stocks to the public. First, the business must take its plan to an investment bank, which then works on gauging the amount of interest from the public. The company launching the IPO decides how many shares it wants to offer to the public, and the investment bank will decide on the initial price of the stocks based on supply and demand. Once the shares go up for sale, there is normally a lot of activity because investors buy new stock they believe to be under or overvalued. This could mean a lot of volatility, which offers a lot of opportunities to trade.

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FAQs

What is a grey market?

A grey market is a market you can use to speculate on a company’s expected valuation before its listing takes place. In the case of Uber, our grey market will settle at the end of its first day of trading.

By taking a position on a grey market, you’re taking a position on a company’s potential market cap (total shares in issue x price) ahead of its IPO. If you think the estimated value of the company is over or under priced, or if news stories surrounding the business creates additional volatility, a grey market enables you to take advantage before the shares are released publicly on the stock exchange.

Who owns Uber?

There is no single person or parent company that owns Uber, although it has several investors. Uber was founded in 2009 by Garrett Camp and Travis Kalanick. The majority of Uber shares used to belong to Kalanick and American venture capital firm Benchmark, but this changed when Uber sold a 15% stake to Japanese conglomerate SoftBank in January 2018.

How does Uber make money?

Uber makes money by charging passengers for rides hailed through its app. The price per ride is calculated using an algorithm that considers the distance of the trip, the time it takes to complete, and the amount of fuel used. Uber takes around 25% of the ride fare, while the drivers take more or less 75%. Uber also makes money from its other offerings, including Uber Eats, Uber Freight and more. Lastly, it generates some income by using its website as an advertising platform.

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