Uber’s New CEO Puts It on the Path to IPO — But Is It Time?

Despite some issues, Uber could have the makings of a hot IPO

By Will Healy, InvestorPlace Contributor

http://bit.ly/2iWUJwD
uber strategy

Source: Shutterstock

The question of when Uber will issue its initial public offering has weighed on investor’s minds for years. Ever since people started using Uber as a word in the English language, it’s begged the question of when the ridesharing company will offer ridesharing in a stock of its own.

Uber’s new CEO, Dara Khosrowshahi, recently took the helm and wants the company to go public by 2019. With an IPO a near certainty, the question remains as to where the company will stand at the time it starts trading on Wall Street.

What to Expect From Uber’s IPO

The company, named after the German word for “super,” helped pioneer the ridesharing concept that has changed local transport. Before, riders needed on expensive taxis that often come from a far-away station. Uber’s ease and lower cost have also been credited with reducing drunk driving.

Today, the San Francisco-based company operates in 633 cities spread across six continents. It celebrated its 5 billionth ride in June. The company has a lot of wear on its tires, to be sure, (with a reported valuation of around $70 billion) but it’s been widely reported that Uber is struggling with profitability.

While an Uber offering will likely attract high levels of demand, the aforementioned issues the company has faced could rattle investor’s nerves. It’s been hard to tell just how much money Uber has lost since the company remains private, financial details are limited.

However, despite $20 billion worth of rides in 2016, the company admitted to losing $2.8 billion. While Wall Street has forgiven losses in hot stocks such as Tesla Inc (NASDAQ:TSLA), investors can turn on stocks that do not become profitable at some point.

As for the question on when Uber will IPO, Khosrowshahi says the company has targeted a 2019 IPO. Uber’s previous CEO, Travis Kalanick, had been working to delay an Uber IPO. The new CEO, however, appears more open to the idea of going public. But there’s more for investors to worry about than profits.

Uber’s reputation has also taken a hit thanks to hackers. Hackers hacked 57 million credit card accounts from Uber’s cloud server. Even more damaging, the company attempted to cover up the scandal by paying hackers a $100,000 ransom.

This likely would have hit an Uber stock hard had the public had the chance to react. However, assuming an Uber IPO occurs in 2019, the company will have time to move on from the PR disaster caused by the data breach.

Further, Uber has received criticism related to workplace culture and business practices. The criticism is not limited to taxi companies who feel the ridesharing has hurt their business, or even competing rideshare services such as Lyft. Employees have also criticized the company for actions such as worker aggression, sexual harassment and shortchanging its drivers. The company also received an “F” rating from the Better Business Bureau in 2014.

Uber Prioritizes Innovation

A further trend that could negatively affect Uber’s 1.5 million drivers worldwide is in company innovation, namely in self-driving cars. The company has teamed with the robotics department at Carnegie Mellon University and Volvo Cars in this venture. Google has competed against companies such as Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), and Tesla in this field.

Uber has also partnered with Dutch mapping company TomTom NV (OTCMKTS:TMOAF). TomTom will provide the company with mapping and traffic data for over 300 of the cities currently served. It has also partnered with Blade to provide helicopter rides with a service called UberCHOPPER.

Bottom Line on Uber

With Uber’s popularity and technology, the company will likely stand in a strong position when it goes public. Its ridesharing concept rose to almost overnight popularity, so much that Uber has almost become its own word in the English language. Moreover, its lower costs have opened ridership to many who couldn’t afford cars or taxis and have reduced drunk driving. The initiatives in self-driving cars, helicopters and mapping can only open more doors.

The company has faced problems with company losses, workplace culture, hacking and aggressive business practices. However, its new leadership has time to turn these problems around and has shown more openness to making an Uber IPO a reality.

With its new leadership and the determination to open and improve its concept, allowing investors to rideshare on an IPO could become Uber’s most popular route.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.


Article printed from InvestorPlace Media, https://investorplace.com/2017/12/future-uber-stock-ipo/.

©2018 InvestorPlace Media, LLC