Uber and the $120bn IPO dream that didn’t come true

  • Goldman Sachs and Morgan Stanley initially valued Uber at $120bn
  • Final IPO price of $45 a share implied valuation of $82bn
  • In first two trading days, this figure dropped to $62.2bn

Last September, Uber’s top management team was pitched by two of the biggest banks in the US: Goldman Sachs and Morgan Stanley. At the time, they reached a virtually identical conclusion and valued Uber at $120 billion.

Uber CFO Nelson Chai and CEO Dara Khosrowshahi listened, and they decided to appoint the two banks to take the firm public and make the $120 billion valuation dream come true.

On Thursday, May 9, Uber finally issued 180 million stock shares in an Initial Public Offering at $45 each. At this price, the company’s market cap was around $82 billion – a rather conservative approach given all the hype.

The next morning at 11:50 am in New York, however, the stock traded about 6% down at $42. It ultimately ended 7.6% lower that day. On the second trading day, it dropped another 11% to close at $37.10, leaving Uber with a market capitalization of just $62.2 billion. 

According to private investors, this is the lowest valuation the company has had since July 2015, when it managed to raise $1 billion at a time when it was valued at $51 billion.

Other companies have also faced major challenges after their IPO, including big names such as Facebook. Uber’s less-than-impressive debut, however, makes many investors rather nervous, particularly those who forked out $45 per share or more. 

The fact that Lyft, an Uber competitor, has only gone from bad to worse since its IPO on March 29 is not helping matters. Its shares are now trading nearly 33% lower than the $72 investors paid for them on that day.