Uber’s recent sale of its UberChina division has increased speculation of a long-awaited Uber stock offering (IPO) — This Uber IPO is a milestone which was considered by many analysts to be months or even years away. Drive for Uber today – sign up at Uber.com
But now, following Uber’s recent announcement that the company will no longer be competitive in the Chinese rideshare market (Uber sold off all of its Chinese assets to rival firm Didi Chuxing for $5.3 Billion; acquiring a 17.7% stake in the company), speculation has mounted that an IPO could occur sometime in 2017 or 2018.
One of Uber’s stated reasons for not launching an IPO was that the company might be capable of continuous high-growth without going public.
Uber’s management aimed to stay private and consolidate its hold over the Asian market — effectively ensuring continued growth without sacrificing the flexibility of being a privately-held company.
However — now that Uber is no longer a major presence in the Chinese market, some analysts believe the company’s continued high-growth potential may have been significantly reduced.
As a potential rideshare growth market, China was still largely untapped (Uber China’s ride-total accounted for 40% of Uber’s overall traffic.) — making it Uber’s best chance to secure continual high-growth globally (now that the American urban market has reached near-saturation levels).
Meanwhile, market analysts expect rideshare North American growth to slow significantly over the next year. Will we see an Uber IPO?
So…how does this affect a potential Uber stock offering?
Currently, it is broadly assumed that Uber is rideshare ‘industry leader’ — an unbeatable company with few major industry threats on the horizon.
By moving to announce an IPO soon (while there is still widespread consensus on the subject of Uber’s market hegemony), Uber would effectively sidestep questions about emerging competitors; financial issues; and other concerns about the company’s long-term viability.
Uber would be capitalizing on the moment — mimicking past successful high-tech IPOs (Facebook; Google; Apple), who launched IPOs from a position of industry dominance and ultimately benefited (with the enduringly-strong stock values to prove it).
Why not wait longer to schedule an IPO?
Waiting too long to schedule an IPO might expose Uber to less favorable market conditions — and see the company underperform stock price estimates.
Companies like Google and Facebook both scheduled IPOs in the midst of strong market conditions, inflating their stock prices and helping amass extremely high cash reserves.
If timed too far in the future, an Uber IPO could risk pitting the company against a wide range of new market challenges, including:
- Increasingly-aggressive competitors (Lyft, Juno, Gett, etc), which have demonstrated a surprising ability to quickly raise investment capital and ‘scale up’ their rideshare fleets much faster than initially thought possible.
- Increasing pressure from drivers for higher pay (leading to lower margins).
- New regulatory challenges (Uber’s ‘independent contractor’ status for drivers continues to inspire resistance globally)
- Market saturation in the West & developed world (i.e., slower growth, less-impressive financial returns, and more complex regulatory challenges as Uber seeks to take on rideshare in less-developed countries — a burdensome task with more risk; less reward).
- Increased competition from sophisticated and highly-capitalized competitors in other fields (i.e., delivery services and food services), which expose some of the flaws in Uber’s stated ambition to become a world-class ‘logistics company’.
When will we know if Uber is going public?
Despite Uber’s recent decision to give up on the Chinese rideshare market, the company’s IPO plans are still firmly under wraps.
However, expect to hear increasing chatter about an upcoming IPO over the next few months — and be on the lookout for news emanating from a growing chorus of Uber’s pro-IPO private investors — many of whom will be increasingly nervous if an IPO stays off the table too long.
Uber still has over $10 billion in cash reserves — so there is no absolute need for the company to go public in the immediate future. However, many analysts increasingly see the prudence of going public while interest in Uber is sky-high, and during a period of strong global growth.
If you’re interested in learning more about buying Uber stock, check out our Uber Stock Guide here, which examines the pros and cons of purchasing Uber Stock, and assembles the evaluations of a range of industry experts on the subject of an Uber IPO.