Ridesharing company Uber is expected to take the plunge into the shareholder scrutiny pool as a public company when it debuts its initial public offering (IPO), with its pricing set for today and an expected trade date tomorrow, May 10.
Uber set a price range of $44 to $50 per share for its IPO in an updated filing last month. On a fully diluted basis, the projected share price would place Uber’s valuation between $80.53 billion and $91.51 billion. At the midpoint of its stated range, Uber’s valuation would be about $86 billion on a fully diluted basis.
Analysts have been concerned about Uber’s steep valuation, as its competitor Lyft has had a tough time during its short tenure on the public market. Uber’s valuation, which was duly disclosed in a regulatory filing, came in at less than the $120 billion that investment bankers valued the company at last year. Final valuation numbers were more in line with the $76 billion valuation obtained during a round of private fundraising in 2018.
The lower value comes after its competitor Lyft and other IPO peers have investors wary of their ability turn a profit as a public company.
“We believe that recent price reductions for both Uber and Lyft may be indicative of investor hesitance to invest in highly capital-intensive, deeply unprofitable and untested business models at this late stage of the economic cycle,” PitchBook analyst Asad Hussain said.
Uber hopes to come out of the starting gates better than competitor Lyft. After debuting with an opening price of $72, Lyft struggled with analyst downgrades early on in its publicly-traded existence.
However, Uber could suffer the same fate as both share similar core business models.
“When it comes to Uber, we believe there are still questions over the current car-sharing model, the economics of which are not immediately or obviously attractive for sustainable, long-term investment,” Mark Hargraves, head of Framlington Global Equities, wrote in a note.
Investors looking to gain exposure to the transportation network company might consider looking at ETFs like the Renaissance IPO ETF (IPO), First Trust U.S. Equity Opportunities ETF (FPX), or RYZZ Managed Futures Strategy Plus ETF (RYZZ), all of which have LYFT holdings.