It is without a shred of a doubt the most anticipated initial public offering (IPO) of the decade and after taxi hailing giant Uber released its prospectus last week, the chatter about its listing day performance has reached fever pitch. The hailing taxi giant is seeking a valuation of a jaw-dropping $90 billion, and according to its filing, the company is going to offer 180 million shares within a price range of $44 to $50 each. Needless to say, the interest in the IPO is through the roof, and the expectation that big institutions could be betting big on the company was further reiterated when payments giant PayPal picked up $500 million worth of shares in a private placement. More importantly, they did not get any discount on that placement.
However, amidst all the positivity about the stock, certain skeptics exist who are not yet convinced that the IPO is going to be a success and many of them have now come forward with their doubts about Uber’s listing. Many of the skeptics believe that the listing price of Uber’s shares is already overvalued and much of the skepticism comes from the fact that the company’s finances are not in order. Uber has never turned a profit and has been losing billions of dollars every year in order to capture as much market share as they possibly can. However, in a telling statement in their prospectus, the company had stated that they might not ever actually turn a profit and needless to say, that is a kind of statement which would put off most investors.
An analyst at Susquehanna Financial Group spoke about his reservations about the company in a note. In the note, he stated,
“We believe the valuation range captures much of the near to intermediate term upside potential. It concerns to see growth decelerate meaningfully over the past several quarters.”
In addition to that, the note went on to state that Uber has not been forthcoming when it comes to full disclosure on some of the most important indicators of performance and that is something that has made it tough to analyze the company properly. In this regard, it is necessary to point out that Uber’s rival taxi hailing company Lyft had its IPO last month and after a bumper opening day, the company’s shares crashed dramatically. It has not been able to recover yet, and that could well prove to be a cautionary tale for investors as they prepare for the biggest IPO in Wall Street history.