Uber is still heavily subsidised

Uber’s initial public offering is the denouement of tech start-ups created in the aftermath of the financial crisis. There will be more IPOs from Silicon Valley in the next couple of years but none will come close to Uber’s $82 billion listing. In spite of its size, Uber managed to make itself appear modestly priced — even before the stock opened lower in its first trade. Revenue last year was $11 billion, valuing Uber at seven times trailing revenue. Rival Lyft opted for a punchier multiple of 11 times… At $45 per share (not the lowest end of the price range but close), Uber will raise more than $8 billion. This will enable it to keep outspending its rivals in the near term. But note that the price is below the $48.77 per share sale of stock three years ago — another poor endorsement for the company’s claim of “unparalleled growth”… Uber’s expansion to more than 60 countries and 91 million monthly users, its battles with regulators and rivals have all been funded by private investors including SoftBank’s bountiful Vision Fund. That has enabled tremendous growth but means rides are still heavily subsidised. The worry is that there is no end date for this strategy. Until a convincing plan for profitability appears, ordering an Uber will be a safer way to extract money from the company than investing in its stock.