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Last week, Uber kind of, sort of announced it was going to go public in early 2019 at a valuation of about $120 billion.
It wasn't Uber directly saying that. It was a Wall Street Journal story that more than likely came from sources at the company.
We can assume the news really came from Uber because the $120 billion valuation number was based on talks Uber had with potential lead underwriters The Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS). And they wouldn't have leaked that to the Journal. That number would have had to come from Uber itself.
And WOW, what a number. Uber's worth $120 billion?
The questions you should be asking are:
- Why is Uber kind of, sort of pushing for an early 2019 IPO right now?
- Why has it taken the nine-year-old company this long to go public?
- How does the company figure it's worth $120 billion?
- And, should you invest in it?
And I can tell you that the answers to all these questions will kind of, sort of shock you, but there's a potentially lucrative opportunity that could make relying on stocks obsolete…
Growth Begets Greed
One reason Uber wants to push its IPO in early 2019 is that its U.S. competitor, Lyft, announced a day before the Uber news hit that it was doing an IPO in early 2019.
Uber CEO Dara Khosrowshahi, who was just brought in this summer, rolled into the C-suite talking about preparing the company for an IPO in 2019. So everyone knew it was finally going to happen – but the anticipation was for late 2019, not early 2019.
The reason Khosrowshahi teased the prospect of an IPO is because investors in Uber were getting anxious about the company's management, its future, and their investment. In other words, a lot of those investors wanted to cash out.
Besides early investors, later-to-the-game investors like Fidelity and Softbank Group Corp. (OTC: SFTBF)'s Vision Fund, are itching to book some real profits on their bet, or at least have some liquidity and an avenue to exit.
Softbank has a 15% stake in the company, a position it acquired in late-round financing and from other investors paring down their stakes – yes, cashing in some of their chips.
Softbank's deal, putting up money in a late financing round (meaning it paid more than early investors did for its stake), came with a perk. The perk Softbank wrangled from Uber is if there isn't an IPO in 2019, investors with at least $100 million in the company, or who've had money in for more than five years, can sell their shares in the private secondary market.
That's a very dangerous position to put Uber in. If Uber shares in the secondary market aren't bid up, but rather sell at lower and lower prices, the valuation of the company starts heading down, and that would really depress the prospects for a successful IPO.
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That motivated the meandering unicorn to announce it would IPO in 2019.
It's now happening in early 2019 because Uber doesn't want to come up lame in the IPO sweepstakes race with Lyft. If Lyft's IPO is before Uber's and it bombs, Uber's valuation will tumble before it debuts, making its post-IPO trading a crapshoot.
Why did it take Uber so long to go public?
Growth begets greed, which is good sometimes.
As Uber grew its brand, its reach, revenues, and valuation grew.
The company's revenue for 2018 is expected to be between $10 to $11 billion. On the high end, that's $3.22 billion, or 41% more than Uber's 2017 revenue.
Late-stage investors have to pay up for their stakes in a growing company. And Uber's no exception.
There's a trick to paying up for your late-stage investment in a company like Uber.
The more new investors have to pay, the higher they make the valuation. But the trick isn't foolproof.
About the Author
Shah Gilani is the Event Trading Specialist for Money Map Press. In Zenith Trading Circle Shah reveals the worst companies in the markets - right from his coveted Bankruptcy Almanac - and how readers can trade them over and over again for huge gains.Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps. He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.