The US ride hailing company Uber opened up its finances in a prospectus on its IPO on Thursday as it prepares for the largest initial public offering in years.
While there is much enthusiasm about the IPO among investors and analysts, questions about the sustainability of the business model of Uber was raised by the contents of the prospectus. In the filing, the company said that in 2018, it made a loss of $1.8 billion, no accounting certain transactions, against revenue of $11.3 billion. The prospectus also showed that the growth of the company was staring to slow down
Last month, Uber’s rival in North America, Lyft, issued its own IPO which valued the company at $24 billion. But just into its second day in trading, the stocks of the company fell below its listing price. Lyft is also al loss making company.
One of the issues for Uber which concerns investors most is that there is a question mark about the future prospects of it making a profit. In its home turf in the US, Uber is burning cash because of its rivalry with Lyft by cutting prices for passengers and expending more for recruitment of drivers into its fleet. In some of the other markets in the world, it is also fighting for market share with local companies by a similar strategy of giving discounts to passengers and financial incentives to drivers. In addition, the company is also making large investments in other businesses like its food delivery and scooter hiring business.
“We will not shy away from making short-term financial sacrifices where we see clear long-term benefits,” Dara Khosrowshahi, Uber’s chief executive, wrote in a letter accompanying the prospectus.
In order to reduce the surprise for investors after it goes public, Uber has opened up its quarterly financial records for the last two years even though it was not mandated to do so because it is a privately held company.
The filing however did not disclose the valuation it is looking out for from public investors. The last valuation of the company was made at about $76 billion. Morgan Stanley and Goldman Sachs is leading the IPO of Uber.
Its filing showed that the company had notched up a profit of $997 million in 2018 mostly from its sale of parts of its business in regions such as Southeast Asia and Russia. If those gains are unaccounted for, Uber stands to lose $1.8 billion in 2018 compared to net loss of $4 billion in 2017.
The filing also showed that its revenue growth has also slowed down. There was a growth of 42 per cent in its revenues for 2018, which came in at $11.3 billion, compared to the previous year. However the growth rate of revenues in 2017 was double that of 2016 for Uber. The prospectus also revealed that Uber is very heavily dependent on its business in just five cities, which account for almost one fourth of the total rides of the company. They are Los Angeles, New York, San Francisco, London and São Paulo in Brazil.
(Source:www.nytimes.com)
While there is much enthusiasm about the IPO among investors and analysts, questions about the sustainability of the business model of Uber was raised by the contents of the prospectus. In the filing, the company said that in 2018, it made a loss of $1.8 billion, no accounting certain transactions, against revenue of $11.3 billion. The prospectus also showed that the growth of the company was staring to slow down
Last month, Uber’s rival in North America, Lyft, issued its own IPO which valued the company at $24 billion. But just into its second day in trading, the stocks of the company fell below its listing price. Lyft is also al loss making company.
One of the issues for Uber which concerns investors most is that there is a question mark about the future prospects of it making a profit. In its home turf in the US, Uber is burning cash because of its rivalry with Lyft by cutting prices for passengers and expending more for recruitment of drivers into its fleet. In some of the other markets in the world, it is also fighting for market share with local companies by a similar strategy of giving discounts to passengers and financial incentives to drivers. In addition, the company is also making large investments in other businesses like its food delivery and scooter hiring business.
“We will not shy away from making short-term financial sacrifices where we see clear long-term benefits,” Dara Khosrowshahi, Uber’s chief executive, wrote in a letter accompanying the prospectus.
In order to reduce the surprise for investors after it goes public, Uber has opened up its quarterly financial records for the last two years even though it was not mandated to do so because it is a privately held company.
The filing however did not disclose the valuation it is looking out for from public investors. The last valuation of the company was made at about $76 billion. Morgan Stanley and Goldman Sachs is leading the IPO of Uber.
Its filing showed that the company had notched up a profit of $997 million in 2018 mostly from its sale of parts of its business in regions such as Southeast Asia and Russia. If those gains are unaccounted for, Uber stands to lose $1.8 billion in 2018 compared to net loss of $4 billion in 2017.
The filing also showed that its revenue growth has also slowed down. There was a growth of 42 per cent in its revenues for 2018, which came in at $11.3 billion, compared to the previous year. However the growth rate of revenues in 2017 was double that of 2016 for Uber. The prospectus also revealed that Uber is very heavily dependent on its business in just five cities, which account for almost one fourth of the total rides of the company. They are Los Angeles, New York, San Francisco, London and São Paulo in Brazil.
(Source:www.nytimes.com)
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