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Uber IPO: 6 Things Investors Should Know

The Uber IPO was the biggest public offering in several years. Here's what investors should know about this high-profile IPO.
May 16, 2019
Investing, Investments
6 Things to Know About the Uber IPO
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The Uber initial public offering was one of the most hotly anticipated in recent years. The IPO valued the controversial ridesharing company at $82 billion — the biggest market debut since 2014.

Potential investors should know this about Uber’s IPO:

1. Here’s the initial price to buy Uber stock

The initial price for Uber stock was $45 per share. Uber trades on the New York Stock Exchange, and the stock is listed under the ticker symbol UBER.

2. It may be the biggest IPO in a year of big IPOs

Uber’s IPO may be the largest in a raft of app-driven companies expected to go public this year. Zoom and Pinterest went public last month, and Airbnb is expected to have an IPO in the coming months.

But the company Uber analysts are most closely following is ridesharing competitor Lyft, which went public at the end of March. Lyft’s IPO price was $72 per share, but the stock has since traded closer to $60 a share. That underwhelming debut is one reason Uber dropped its own IPO price, which initially was expected to value the company at up to $100 billion.

Stock prices after an IPO can be volatile, especially in the first year of trading. Take Facebook, which went public in May 2012 at $38 a share, then spent over a year trading below that price. The company’s stock is now trading for close to $200 a share.

3. Risks to Uber investors include … Uber

Uber has been unafraid to, as Facebook used to put it, “move fast and break things.” Since its founding in 2009, the company has aggressively moved its ridesharing business into 65 countries — often falling afoul of local regulators, taxi unions and even its own drivers.

Uber’s company culture has also been a hot-button issue. Co-founder Travis Kalanick was ousted as CEO in 2017 after a raft of scandals that included allegations of sexual harassment and a lawsuit claiming intellectual theft from Waymo, the self-driving subsidiary of Google parent company Alphabet Inc.

Uber acknowledges these and other risks in its S-1 filing, a form companies are required to file with the Securities and Exchange Commission before going public. “Our workplace culture and forward-leaning approach created operational, compliance, and cultural challenges, and our efforts to address these challenges may not be successful,” Uber wrote in the filing.

4. Uber may never be profitable

Among the financials revealed in Uber’s filing is the fact that Uber lost $1.8 billion last year. In a summary of risks to investors, the company noted: “We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability.”

Some would-be investors may scratch their head at this fact: How can a company losing so much money be a good investment?

Investors who initially overlooked Amazon may be afraid to miss being on the ground floor here.

Fear of missing out — often called FOMO — may explain a lot. Analysts point to another company that wasn’t profitable for years after it went public: Amazon. The online retail behemoth bled cash for years after its 1997 IPO as it heavily invested in expanding market share. But in Amazon’s case, things eventually turned around: Last quarter, it turned a record $3.6 billion profit.

Uber is following a similar “play to win” strategy. “We will not shy away from making short-term financial sacrifices where we see clear long-term benefits,” CEO Dara Khosrowshahi wrote in Uber’s IPO filing.

Investors who initially overlooked Amazon may be afraid to miss being on the ground floor here.

5. Uber isn’t just ridesharing

Another reason investors are excited about Uber: There’s more under the hood than its well-known ridesharing app. Other parts of the business include food-delivery service Uber Eats and a commercial-shipping division called Uber Freight.

But for future profits, the most promising part of the business may be Uber’s Advanced Technologies Group, which is working to build self-driving car technology. That work aims to replace not only taxi drivers, but potentially all drivers, including Uber’s contract workforce. As such, Uber may be only “scratching the surface of the full monetization potential” of its platform, Wedbush Securities analyst Ygal Arounian wrote in a research note.

6. You, too, can buy Uber stock

If the possibilities intrigue you — and the lack of profit doesn’t scare you off — you might wonder where and how to buy Uber. You can buy Uber, and any other stock, through a brokerage account or an individual retirement account like an IRA. (Here’s how to open a brokerage account if you don’t already have one.)

You can buy Uber, and any other stock, through a brokerage account or an individual retirement account like an IRA.

If you’re reluctant to put all your eggs in one basket, that’s the right instinct. A few things to keep in mind: As a general rule, keep investments in individual stocks like Uber to no more than 10% of your overall portfolio. The rest should be invested in mutual funds or index funds, which help spread risk and reap more consistent returns. And don’t invest any money you might need in the next five years — the stock market is a long-term investment, and you need time to weather volatility. That may be especially true with a stock new to the market like Uber.

» Learn more: How to invest in stocks

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