The relatively subdued IPO market of 2019 is about to see the largest stock offering since Facebook. Ride hailing company Uber (NYSE: UBER) is finally going public with a much-anticipated offering that is expected to raise more than $8 billion for the company.
Uber’s announcement follows months of buildup and speculation.
180 Million Shares Up for Sale
Uber told the world on Thursday that it would sell 180 million shares valued at $45 each. This will raise $8.1 billion for the company, which is currently the biggest ride hailing operator in the world. This will be the largest Silicon Valley public offering since Facebook entered the stock market in 2012.
Capital raised in the IPO could go even higher than Uber’s initial figure. Morgan Stanley, Goldman Sachs, and Bank of America Merrill Lynch are underwriting the stock offering. They will collectively have access to 27 million shares to cover excess allotments. PayPal Holdings Inc. has already been announced as a major investor. The company will buy $500 million worth of stock in a private placement separate to the IPO.
The offering will see Uber valued between $80.5 billion and $91.5 billion, far more than the $72 billion valuation that the company received in early 2018.
Uber Sees a Future Beyond Ride Hailing
The tentative valuation would cement Uber as the biggest company of its type. However, potential investors should look beyond the current business model when evaluating the viability of this stock.
Core business still revolves around ride-hailing through a smartphone app. The company wants to use its new capital injection to pursue a broader range of technology and services. Uber wants to be the logistics and transportation company of the future. Self-driving vehicles and commercial package delivery are just two options for business expansion.
The company is hoping that its future aspirations will overshadow the $3.03 billion in operating losses that were reported last year. In the first quarter of 2019, the company posted a net loss of $1 billion on revenue of $3 billion.
Uber is a risky stock in a service segment that is exciting but unproven. Strong market presence means that Uber can compete with other emerging and established ride hailing platforms, but investors will need to decide how deep they are willing to go on what is ultimately a very speculative stock pick.
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