While Uber's IPO is drawing big-name supporters including PayPal, there's a rising chorus of voices saying the world's biggest ride-hailing company is coming to market at levels which are already overvalued.
Uber is offering 180 million shares at $44 to $50 apiece for its public debut. On a fully diluted basis, its valuation could top $91.5 billion, making it the biggest public offering since Alibaba. However, Uber's profitability, slowing growth and limited disclosures on key financial metrics are bringing out the doubters.
"We believe the valuation range captures much of the near to intermediate term upside potential," Shyam Patil, tech analyst at Susquehanna Financial Group, said in a note Wednesday. "It's concerning to see growth decelerate meaningfully over the past several quarters. ... The company has also chosen to limit disclosures on [key performance indicators] for the core business, making it more difficult to analyze performance."
Uber is already taking a conservative approach in pricing its IPO as the valuation range came in far below the eye-popping $120 billion expected previously. The debut of its rival Lyft a month ago might have put a damper on Uber as shares of Lyft continue to sink in the weeks after the IPO. The stock was trading at $59.28 midday Wednesday, well below its IPO price of $72.
But the valuation is still considered too high as Uber's growth slowed "drastically" over the past year, Patil said. Its bookings growth has slowed from the high 50% in the first quarter of last year to mid-30% in the first quarter of 2019, while adjusted revenue growth decelerated from 85% to 14% over the same period. Uber reported an operating loss of $3 billion on $11.3 billion in revenue for 2018.
NYU Stern professor Aswath Damodaran, known as "Wall Street's Dean of Valuation," valued Uber at only $60 billion, saying the company is "struggling with a way to convert revenue growth into profits."
Uber's offering is being led by Morgan Stanley, Goldman Sachs and Bank of America. The company plans to price the IPO on May 9 and begin trading on the New York Stock Exchange the following day under the symbol UBER.