Uber priced its shares at $45 a piece, near the bottom of its indicated $44-to-$50 range, after paring expectations following the fraught debut of its US rival Lyft and a broader US markets sell-off.
The ride-hailing company sold 180m shares to raise $8.1bn in new capital and deliver a total valuation of $82.2bn on a fully diluted basis. This makes it the biggest IPO for a US-based technology company since Facebook in 2012, and the tenth biggest overall US listing in terms of proceeds, according to Dealogic.
The stock will begin trading on the New York Stock Exchange on Friday under the ticker UBER. The lead underwriters on the IPO were Morgan Stanley, Goldman Sachs and Bank of America.
Despite its rapid rise to become one of the biggest global ride-hailing companies, Uber’s valuation has not increased as spectacularly as some early backers hoped. It is selling shares to public investors below the $48.77 price at which it sold stock to private investors including Saudi Arabia’s Public Investment Fund three years ago.
Excluding the new funds raised and a $500m private stock sale to PayPal at the IPO price, Uber’s IPO valuation of $73.6bn fell below the $76bn reached in its last private fundraising in August.
Before it launched its IPO roadshow, Uber had told some holders of its convertible notes that it could price in a range of $48 to $55 a share, giving it a valuation of $90bn to $100bn.
“There is investor demand for these types of businesses that are innovators and creating new economies that are changing the way we drive and changing the way we exchange ideas, but not euphoria,” said Jordan Stuart, client portfolio manager from the Federated Kaufmann funds.
Mr Stuart said that investors are interested in profits alongside disruptive technology and revenue growth. “The market is being very deliberate,” he said. “Investors are looking for a pathway to profitability.”
Uber decided to take a more conservative approach to pricing in the last few days as it wrapped up two weeks of investor meetings in New York, London, San Francisco and other cities, according to a person familiar with the roadshow.
Executives and bankers were keen to avoid a sell-off like Lyft has seen in its early weeks of public trading. Uber prioritised the allocation of shares to institutional investors and “blue-chip” funds that were seen as more likely to hold the stock for the long-term, rather than hedge funds or retail investors, the person said.
Lyft, which only operates in the US and Canada, debuted in March with an offering that raised $2.3bn and valued the company at $24bn. Since then, its shares have traded well below their IPO price of $72 as investors grow concerned about the lack of profits in the ride-hailing industry and pressure from short sellers. Lyft shares closed on Thursday at $55.18.
“The Uber team is playing a long game here in their pricing strategy,” said Eric Kim, co-founder and managing partner at Goodwater Capital. “They are trying to get the right shareholders who will be with them for the long term, so they are pricing shares more attractively.”
“Given how much negative sentiment there is right now in the overall ride-sharing space that we see in the performance of Lyft stock, the market will reward Uber for being measured in its pricing strategy.”
Even with the more conservative pricing, Uber’s co-founders and early investors are set for a bonanza.
Travis Kalanick, the Uber co-founder who was chief executive from 2010 until he was pushed out in 2017 following a series of controversies, holds a stake worth $5.3bn at the issue price. Fellow co-founder Garrett Camp and Ryan Graves, Uber’s first employee, have stakes worth $3.7bn and $1.5bn, respectively.
Softbank’s Vision Fund, which injected $7.7bn into Uber in January 2018 to become its largest shareholder, has reaped a big return on its investment, with its stake now worth $10bn. It paid an average weighted price of $34.50 for a combination of new shares and a larger tranche bought at a discount from existing shareholders.
Other big investors include Benchmark, the venture capital firm that was involved in Mr Kalanick’s exit and which now holds a stake worth $6.75bn, and Google parent Alphabet, with a $3.2bn stake thanks to investments in Uber and a settlement in a trade secret theft case brought by its Waymo division.
But the Saudi fund, which injected $3.5bn into Uber in 2016, now holds a stake worth less at $3.3bn.
Mr Kalanick, Mr Camp, Mr Graves, SoftBank and Benchmark may realise some gains from the sale of shares over the next 30 days as part of the underwriters’ “greenshoe” option.
Uber’s public debut is the largest and most eagerly anticipated in a group of well-known Silicon Valley companies that have tapped private investors’ appetite for rapid growth and tolerance for deep losses.
In investor meetings over the last two weeks chief executive Dara Khosrowshahi has positioned Uber as a “platform” for transportation, from ride-hailing and public transit to food and freight delivery. The company has told investors it will eventually become profitable, despite years of operating losses and stalling growth in recent quarters.
Uber’s year-on-year revenue growth rate slowed to between 18-20 per cent in the first quarter of 2019, as it posted an unaudited range of $3.0-3.1bn. A year ago, the growth rate was 70 per cent. Losses were at least $1bn in the three months to March 2019.