
Uber Proposals Value It at $120B in Possible 2019 IPO - bko
https://www.wsj.com/articles/uber-proposals-value-company-at-120-billion-in-a-possible-ipo-1539690343
======
olivermarks
Softbank just took a huge stake in Uber at beginning of 2018

The valuation numbers have yoyo'd up to 120billion despite

'....The deal includes a large purchase of shares from existing Uber investors
and employees at a discounted valuation for the company of $48 billion, a 30
percent drop from Uber’s most recent valuation of $68 billion. These secondary
stock sales will be completed by the end of the day Thursday on the Nasdaq
Private Market, an Uber spokesman said'.

[https://www.reuters.com/article/us-uber-softbank-
tender/soft...](https://www.reuters.com/article/us-uber-softbank-
tender/softbank-is-now-ubers-largest-shareholder-as-deal-closes-idUSKBN1F72WL)

We've gone from a damaged company worth 48b in January to a 120b valuation in
a few months. Presumably the Saudi and Japanese softbank investors are hoping
to extract an ipo profit.

~~~
sonnyblarney
Private transactions may not be a very good measure of valuation.

Remember that just because a few shares change hands at $X, doesn't mean that
supply/demand puts them all at that price.

Insiders might be more inclined to sell some off, there could be special
terms, yada yada.

~~~
hkhanna
Agreed. The shares sold in the secondary offering were likely shares of common
stock, whereas the last round of funding would have been a sale of preferred
stock.

I would expect there to be a natural discount off the preferred valuation
since the common stock doesn’t have the same downside protection. A 20-30%
discount would not be at all unusual in my experience.

~~~
DSingularity
What is this "downside risk" that exists for common stock and not preferred
stock?

~~~
olliej
Basically it’s the “you’re just an employee” risk of startups.

A non employee investing 100k in your company is clearly contributing more
than a full time employee being paid in RSUs, so when the company gets
liquidated (eg statistics happens) they will get paid back, whereas your
employees don’t.

Alternatively, the company might sell enough preferred stock to VCs to give
them majority voting rights, and they can then devalue the common stock and
sell the company with none of the proceeds going to common stock.

Or your company never goes public, but common stock comes with rules against
selling it on private markets, so it can functionally be treated as being
worth $0. Or of course (because you can’t sell it) the company can impact
clawbacks without you even doing anything wrong.

Of course I’m not saying that all startups do that, just that that can happen
(and I believe all of the above _have_ happened).

That’s part of why I will never work at a startup, though not necessarily by
choice: many HN people have claimed told me on many occasions that it is
unreasonable for me to expect to get fair compensation from a startup. Shrug.

Anyway, for other people who are willing to take the risk of a $0 return from
a company selling at a profit, I would strongly recommend having a lawyer look
at your contract to verify none of the more egregious failings listed above
can happen, and remember that stock compensation is worthless if you cannot
sell it.

~~~
aqme28
> A non employee investing 100k in your company is clearly contributing more
> than a full time employee being paid in RSUs

How do you figure?

~~~
notyouravgdoge
I think they were being sarcastic

~~~
olliej
correct, I had thought in this context at least it was obvious :)

------
justfor1comment
Yes, they have a big user base but the biggest concern for me as an investor
would be can they increase prices without losing users. I believe Uber
customers are very price sensitive and on top of that the self driving
division was shut down so their costs won't go lower any time soon. So how
will this business generate billions of dollars in profit?

~~~
Axsuul
Uber has not shut down their self-driving division[1]

1\. [https://www.nytimes.com/2018/08/19/technology/uber-self-
driv...](https://www.nytimes.com/2018/08/19/technology/uber-self-driving-
cars.html)

~~~
misiti3780
they shut down the self driving trucks only correct?

~~~
Axsuul
Correct!

------
panda427
They have been potentially "IPO"ing for 4 years. Until they announce it
formally I don't believe any reports.

~~~
hammeiam
What? TK was very vocally opposed to IPOing while he was CEO. Uber has
publicly stated that it is targeting 2019 for an IPO, and in fact that was a
condition as part of Softbank's recent investment.
[https://www.investopedia.com/news/uber-will-
ipo-2019/](https://www.investopedia.com/news/uber-will-ipo-2019/)

------
philipodonnell
These proposals are just advertising for the firms trying to win the IPO deal
as they try to one-up each other to predict the largest valuations. It's
basically meaningless.

~~~
ProfessorLayton
If I understand IPOs correctly, I don't think that's true. Underwriting firms
are left holding the bag if they overprice a stock, so it is not in their
interest to overvalue it during an IPO. Further, if the price is too high,
they'll cool down enthusiasm for the stock, and depress the price.

~~~
Lazare
I think you understand IPOs correctly, but you missed the bit where this isn't
an IPO.

This is the bit where some firms say "hey, at some point in the future you
should totally sell yourself through us, we think you're very likely totally
probably worth a zillion dollars".

And then at some point in the future Uber will actually do an IPO with one of
these banks, and the underwriters will price the stock at whatever level
they're confident they can clear the shares, and it will be a lot less than
$120 billion, and Uber will say "what happened, you said you thought we were
worth a zillion dollars!", and the banks will cough and shuffle their feet,
and tell some white lies, and blame the economic cycles and sunspots and the
lack of vision of the institutional investors who bought the bulk of the
shares.

But the reality is, nobody thinks Uber is worth $120B, and nobody (least of
all Uber) should take the headline as suggesting that someone does. The $120B
number is meaningless, it's just flattery to try and convince Uber to go with
them for the IPO, where _actual_ numbers will have to be pulled out of a hat.

------
aetherson
This would be a kind-of-astoundingly-to-me positive valuation for Uber. If
they can get it, they'll have proved a lot of the haters (like me) wrong over
the last few years.

~~~
AnimalMuppet
No, that won't prove the haters wrong. It will prove the haters wrong if Uber
can not only IPO but not crater thereafter.

~~~
aetherson
I mean. If they briefly touch $120B at 10am on their opening day and then
sanity prevails and they close trading at $20B, sure, I reserve the right to
crow about how I was an Uber skeptic before Uber skepticism was cool.

But if they spend a few weeks at $120B and then cool off to $90B, or even
$60B, then I should and will eat that crow.

~~~
calyth2018
Why should you eat crow?

Opening weeks of an IPO is usually a frenzy until rationality returns, no?

~~~
praneshp
Because aetherson's definition of sanity is 20B. If the stock is 60b after 6
months, then crow eating is not totally unfair.

------
yfares
Most relevant info here has to be how banks are thinking about the current
market and climate of IPOs. Seems like the view is that market conditions
haven't really changed, even with recent market jitters. Will be interesting
to see how this perception holds through to the actual IPO date next year.

~~~
iaw
I'm amazed because it implies positive free cash flow in the billions which,
last I heard, Uber did not have.

Barring some major turn around, or increase in competitive advantage, my guess
would be that there are a lot of people that want to get their money out
before the whole thing implodes.

~~~
GreeniFi
There seems to have been a general uptick in mainstream media warnings of a
recession recently. For example the Economist cover last week: “how bad will
the next recession be”. I’m not an expert I hasten to add, but before 2008 I
also noticed this slow ratcheting up of the focus ahead of the final blow-up.
I realise this could be a very biased viewpoint, it’s only a datapoint, but it
makes me wonder, if you could track google search terms related to recession
over time or appearances in the press, would this be a predictor of actual
sentiment and impending recession?

I also wonder if there is a generalized impending sense of doom and investors
feeling like they need to exit ahead of a crash.

~~~
GreeniFi
I just checked google trends, and a very superficial look suggests an upwards
trend line over the last 5 years.

[https://trends.google.com/trends/explore?date=today%205-y&ge...](https://trends.google.com/trends/explore?date=today%205-y&geo=US&q=Recession)

------
tim333
$120bn eh?

Their recent results were:

> adjusted losses before interest, tax, depreciation and amortisation of $404m
> for the three months to the end of June

> revenue ticking up 8pc quarter-on-quarter to $2.7bn

There would have to be quite an improvement to justify that. I guess if
revenue went 20bn/yr and they made $5bn on that it might look ok.

Seems the bull case is they use their position to dominate taxis, delivery,
logistics and similar [https://www.quora.com/What-justifies-
Uber%E2%80%99s-70B-valu...](https://www.quora.com/What-justifies-
Uber%E2%80%99s-70B-valuation)

On the downside Waymo seems ahead on the self driving thing with actual
driverless taxis supposed to be rolling around Phoenix shortly
[https://arstechnica.com/cars/2018/10/waymo-wont-have-to-
prov...](https://arstechnica.com/cars/2018/10/waymo-wont-have-to-prove-its-
driverless-taxis-are-safe-before-2018-launch/)

~~~
ksec
>On the downside Waymo seems ahead on the self driving

Once that Driverless Taxi Start real world testing and Waymo gets more Data,
it will likely grow at a rate Uber can never catch up.

------
ccwilson10
It'll be interesting to see how the new "ride sharing" economy of scooters and
bikes impacts their bottom line. The scooters are very popular in SF so far
and Uber recently launched in Santa Monica. Seems like a more scalable way to
get into cities and not rely on a driver infrastructure.

Anyone have any idea of the ROI of a scooter so far?

~~~
dsnuh
The scooters and bikes are a complete nuisance in my city. The companies
littered almost every intersection with 4-8 scooters. I don't see the bikes as
much anymore, other than stolen ones that every homeless person seems to have
now. I have seen a total of 3 people riding the scooters ever. They are often
tipped over into the sidewalk or into the bike lane or roadway. You can go
into certain parts of town and it literally looks like all sidewalk space has
been surrended to parking lots for these bikes and scooters.

~~~
southphillyman
This was my impression when I went to Santa Monica/Venice last December and I
had to step over an unused Bird scooter every 3rd step. But recently I was in
Atlanta and they are hugely popular there. Everyone from little kids to office
workers with helmets on were using them. I wish they were in my city, seems
like an awesome way to travel <10 blocks. I'll be going to LA and Atlanta both
fairly soon and will def give the scooters a try.

~~~
bllguo
ehh last december might have been too early, to be fair. These days I see
people using the scooters almost every time I go outside

------
whatok
Lyft also announced IPO plans on a similar timeline shortly after and
Postmates just did too.

~~~
marnett
seems oddly convenient given all the free money drying up from fed rate hikes

------
jamesrom
They are lying to you.

[https://news.ycombinator.com/item?id=12657116](https://news.ycombinator.com/item?id=12657116)

------
paulie_a
Maybe post ipo they can fix their basic navigation features. If you book a
ride and it says northeast corner it will always be Southwest corner. Drivers
admit this and barely use Ubers navigation. They use Google maps.

------
elvirs
as an occasional uber driver and sometimes passenger I have to say while it
has its moments when Uber is most convenient and cheap option there is nothing
super amazing about this company or their product. Drivers are unhappy about
worsening pay (uber keeps bigger cuts), riders are unhappy about worsening
qualify of cars/drivers while uber still has not reached profitability. I
would not bet the house on ubers ipo. may as well go the Groupon route

------
sandeeps_
how much money will a software engineer at Uber make, if this IPO goes
through?

------
eip
18 year cycle confirmed.

------
RIMR
Split between drivers, this is $750,000/driver.

I get that Uber has a massive footprint, but given that they've never turned a
profit in their entire company history, I don't understand how they can be
worth this much...

~~~
aeternus
They are profitable in many cities, they basically just reinvest 100% of
profits in geographic expansion. Amazon did the same thing, and investors said
the same thing, and look how that turned out.

~~~
Sohcahtoa82
Is there a term for costs that are purely associated with growth and not
regular operations?

For example, research and development on new products/features, expansion of
manufacturing capabilities, building new offices, etc.?

I frequently see people talk about X corporation not being profitable, but the
claim is often extremely short-sighted as they ignore money being spent on
growth and development. Ever dollar kept as "profit" is money not being spent
on growth, which is huge when your company is still growing.

~~~
Dwolb
It’s tough to tell without guidance directly from the company.

For sure internally they have some sort of calculation for “If we ceased all
growth activities and maximized our pricing power and minimized our costs, how
much cash could we bring in over the next x years?”

------
krn
The problem with Uber is, that it's only really successful in North America.
It's heavily restricted in almost entire Europe[1], and lags behind many
regional providers, such as Taxify, where it's not. Uber's only real
international win is huge stakes in Didi Chuxing, Grab, and Yandex Taxi. But
it's not like the entire world is using Uber, or ever will.

[1]
[https://www.washingtonpost.com/news/worldviews/wp/2017/11/10...](https://www.washingtonpost.com/news/worldviews/wp/2017/11/10/with-
new-court-loss-in-britain-europe-becomes-more-of-a-minefield-for-uber/) (see
the map)

~~~
deminature
This is not even accurate: the service is incredibly popular in Middle East,
Latin America and India [1] and is both popular and legally permitted in
London as of June 2018 [2]. The article you've linked is almost a year old and
out of date.

[1] [https://www.recode.net/2018/3/26/17164388/ubers-southeast-
as...](https://www.recode.net/2018/3/26/17164388/ubers-southeast-asia-india-
middle-east-latin-america-ride-hail-taxi-service-international) [2]
[https://www.bbc.com/news/business-44612837](https://www.bbc.com/news/business-44612837)

~~~
krn
> This is not even accurate: the service is incredibly popular in Middle East,
> Latin America and India [1]

That's not what your source claims. It says, that these are the only big
markets in which Uber still has a chance to succeed after retreating from
China, Russia, and South East Asia.

> The article you've linked is almost a year old and out of date.

I linked to the map of the continent, not to a case of a single city. But your
own source states, how many problems Uber faces even in London:

> Uber has now been awarded a licence but it has been put on probation for 15
> months.

> So Uber is now free to continue operating in a very important market - but
> on probation with Transport for London watching its every move.

~~~
deminature
If you read my source, you'll see that it does support my argument:

>Indeed, India is a vast market that accounts for 10 percent of Uber’s trips
with 10 million rides a week, so ceding ground there will be undoubtedly
damaging to the company.

>“India is a key component of our growth plan,” Khosrowshahi told the Economic
Times during a recent trip to India. “If you look at the market, it’s one of
our healthiest markets in terms of growth rates.”

>In Latin America, the company has seen incredible success as the region
quickly became its fastest growing.

~~~
krn
In India, there might be no Uber left very soon[1]:

> This rivalry has been less welcome to Japanese technology giant SoftBank,
> which holds large stakes in both Uber and Ola. Encouraged by their common
> shareholder, the pair have held talks on a potential merger, according to
> people with direct knowledge of the discussions. That move would create a
> business controlling almost the entire Indian ride-hailing market, which
> last year had revenue of at least $2.1bn, according to RedSeer Consulting.

The same will probably happen in Latin America, where Didi bought 99 taxis, a
Brazilian-based ride hailing company that it is specifically focused on
dominating the region[2].

In the long run, I expect Uber as a brand to exist only in English-speaking
markets.

[1]
[https://www.ft.com/content/af3aab5c-52d6-11e8-b3ee-41e020920...](https://www.ft.com/content/af3aab5c-52d6-11e8-b3ee-41e0209208ec)

[2] [https://www.bloomberg.com/news/articles/2018-01-03/didi-
buys...](https://www.bloomberg.com/news/articles/2018-01-03/didi-
buys-99-taxis-igniting-fight-with-uber-in-latin-america)

