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 the next few years – potentially before 2020.
Why do many analysts believe an Uber IPO announcement date may have moved forward?
With Uber no longer a major presence in the Chinese market, its short-term growth possibilities may have been significantly curtailed. Chinese rides accounted for 40% of the company’s overall traffic — and the mainland Chinese market was still largely untapped. Simultaneously, market analysts expect rideshare’s general growth to slow by 6% in 2017 — significantly cooling off North the American and European rideshare market.
So…how does this all affect a potential Uber stock offering?
Currently, it is broadly agreed upon that Uber is rideshare’s singular, dominant force — a veritable ‘industry leader’ with few major industry threats on the horizon.
By moving to announce an IPO sooner rather than later (while there is still widespread consensus on the subject of Uber’s market hegemony), Uber would effectively sidestep questions about emerging competitors; financial issues; employee disputes; and other concerns about the company’s long-term viability.
Uber would be capitalizing on the moment — mimicking past successful high-tech IPOs (Google; Facebook; Apple), who launched IPOs from a position of industry dominance, and ultimately grew exponentially stronger as a result.
Why not wait longer to schedule an IPO?
Waiting too long to schedule an IPO might expose Uber to less favorable market conditions — risking embarrassment if the company underperforms initial 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.
The O’Connor v. Uber Technologies Case
A California’s judge’s rejection of Uber’s recent $100 million settlement in the O’Connor case complicates a possible IPO — if Uber is forced to classify its partners as ’employees’ , it could deal a substantial blow to the company’s overall market value (and fundamentally alter its business model) by forcing Uber to resemble a traditional transportation company without ‘independent contractor employees’ — a change which would likely cost billions in employee compensation.
Many analysts believe that — until Uber has worked through its driver-compensaiton issues more thoroughly — an IPO announcement is highly unlikely, or perhaps completely off the table.
Only time will tell.
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 opinions of industry experts on the topic of Uber’s Stock Value.