Taxi-hailing startup Uber Technologies is all set to list on the US Stock exchanges today, in an IPO that is expected to raise upwards of $8 billion dollars. Uber has placed the issue price at $45/share and will raise a minimum of $8.1 billion. Market watchers are rating the debut as underwhelming given it trails the recent big-ticket IPOs in the US, with Facebook raising $16 billion through its 2012 offering and Alibaba raking in roughly $25 billion in 2014.
By pricing its shares at the lower end of the targeted range for a valuation of $82.4 billion, Uber is hoping its conservative approach will spare it the trading plunge suffered by rival Lyft Inc. A lack of visibility around profitability, concerns over mounting competition and slowing growth, and growing discontent among its drivers is taking the sheen off what promises to be one of the most highly-anticipated IPOs of all time.
The year’s biggest IPO comes against a backdrop of turbulent financial markets, fueled by the trade dispute between the United States and China, as well as the plunging share price of Lyft, which is down 23 percent from its IPO price in late March. Despite Uber moderating its IPO expectations, some still consider the stock overpriced. Like Lyft, Uber will face questions going forward over how and when it expects to become profitable after losing $3 billion from operations in 2018. Given the fierce competition from rivals including Lyft in North America and Ola in India, it is a race to capture market share through discounts and promotions, which eats into profits.
Meanwhile in the run up to the IPO thousands of Uber drivers went on strike across countries like USA and India demanding better wages and working conditions. In its submissions to the US stocks regulator SEC Uber has admitted, “As we aim to reduce Driver incentives to improve our financial performance, we expect Driver dissatisfaction will generally increase.” These are some of the challenges that Uber admits could temper future growth.