Waiting for Uber – IPO set on lower range of stock price
Uber Technologies Inc. raised $8.1 billion in its initial public offering after pricing shares near the bottom of their marketed range, according to Bloomberg. The ride-hailing company sold 180 million shares for $45 each, according to a statement Thursday. It had marketed them for $44 to $50 apiece. But Uber said maybe it will never go into profitability. Uber will begin trading publicly on today.
Based on the amount of stock outstanding after the offering, the IPO price gives San Francisco-based Uber a market value of $75.5 billion, just below its last private market value of $76 billion. The fully diluted value, including restricted stock units and other shares, could be about $82 billion.
Uber has prioritized selecting shareholders -- particularly institutional investors -- that it thinks will hold on to the stock for a long time, according to a person familiar with the matter. The company is hoping to avoid the tumultuous first weeks of trading in rival Lyft Inc., whose shares fell below its $72 IPO price within days of listing and closed 23 percent below that price Thursday.
“We view Uber’s conservative pricing as a smart and prudent strategy coming out of the box as it clearly learned from its ‘little brother’ Lyft, and the experience it has gone through over the past month,” Wedbush Securities analyst Dan Ives said. Uber’s biggest competitor briefly dipped below its last private value of $15.1 billion in premarket trading Thursday, before rebounding to close at $55.18 for a valuation of about $15.8 billion.
Even at the low end of the price range, Uber’s listing is set to be among the 10 largest U.S. IPOs of all time and the biggest on a U.S. exchange since Alibaba Group Holding Ltd.’s $25 billion global record holder in 2014, according to data compiled by Bloomberg.
Still, it’s a considerable climb down from earlier projections: Last year, bankers jockeying to lead the offering told Uber it could be valued at as much as $120 billion in an IPO.
That’s partly because, after waiting a decade to go public, the most highly valued startup in the U.S. is set to make its market debut amid less-than-ideal conditions. U.S. stocks fell for a fourth day Thursday, leaving the S&P 500 index on pace for its worst week of the year as trade tensions escalated between the U.S. and China. Uber shares are due to begin trading on the New York Stock Exchange Friday, under the ticker UBER.
This year, widely expected to be the busiest for mega U.S. tech listings this century, started with a partial government shutdown that shuttered the agency that approves IPO documents for 35 days, all but killing activity in the first quarter. After submitting its confidential filing in December, Uber -- along with Lyft and a host of other hopefuls -- was left sitting on the sidelines while U.S. stocks enjoyed the best start to a year in at least a decade.
The pricing -- and subsequent trading performance -- will be closely watched by the cavalcade of other tech startups that are expected to go public this year, including Slack Technologies Inc., Postmates Inc., Peloton Interactive Inc. and Airbnb Inc.
Uber’s executives and advisers settled on a final IPO price after spending the past couple of weeks pitching to potential investors at roadshow events in cities including New York, London and San Francisco. Picking the right number helps ensure that the stock has a stable start to trading: The price goes up, but not enough to worry investors into thinking that more money should have been raised.
On the roadshow, Uber touted its plans to expand in logistics and other transportation businesses, including scooters, autonomous driving and mass transit, a person familiar with the matter has said. The company aims to become a one-stop shop for customers who would only need to use one platform for multiple services.
Arun Sundararajan, a professor at New York University’s business school, said that while going public will give Uber money to capture more of the transportation market, it could also push it to put quarterly targets ahead of its broader ambitions.
“The trillion dollar valuation will come if they can spend the next five to 10 years getting to that place where more is spent on Uber than on any other form of transportation,” Sundararajan said. “The trouble is that’s going to require keeping investors at bay who are putting pressure on Uber to deliver earnings.”
“The freedom to play the long game gets significantly reduced when you go public even when the resources to do so are increased,” he said.
Like many of the IPO class of 2019, Uber is deeply unprofitable. It lost $3.04 billion last year on an operating basis on revenue of $11.3 billion, bringing total operating losses over the past three years to more than $10 billion, according to filings.
Uber has been working with Morgan Stanley to lead its IPO plans, alongside Goldman Sachs Group Inc. -- once the company’s go-to bank -- and Bank of America Corp. as part of a roster of 29 banks in total that were listed in its prospectus as advising on the offering.
The ride-hailing company priced its shares at $45 on Thursday, near the bottom of its targeted range of $44 to $50. The announcement crystallizes 10-figure stakes for co-founders Travis Kalanick and Garrett Camp, early employee Ryan Graves and investors like SoftBank Group Corp., Benchmark, Saudi Arabia’s Public Investment Fund and Alphabet Inc., according to calculations by the Bloomberg Billionaires Index.
How much is a great idea worth? In the case of Uber Technologies Inc., the answer is $3.7 billion. That’s the value of the stake held by Garrett Camp, the inventor of Uber, ahead of the company’s first day of stock trading on Friday. It’s an unfathomable sum, even for Camp, who was already an internet millionaire.
With that haul, Camp could buy his hometown hockey team, the Calgary Flames, and probably still afford the seven other teams in its division. He could gift a brand-new Toyota Camry to nearly a fifth of the population of his adopted city, San Francisco. Instead, he says he’ll spend a chunk of the money on the thing he loves most: creating startups.
The Uber IPO is America’s single greatest corporate wealth creation event since Facebook Inc. Uber’s initial public offering values the business at $75.5 billion. As with other Silicon Valley success stories, the money will be concentrated among a small group of early employees and investors. Camp won’t be the biggest individual winner of the stock offering. That would be Travis Kalanick, another founder and the former chief executive officer who now has a net worth of more than $6 billion, according to the Bloomberg Billionaires Index. But Camp holds the distinction of reaping the largest windfall for doing the least amount of work.
This was by design, Camp says in an interview. He came up with the idea for Uber in 2008, while running a popular website he created called StumbleUpon. He spent a couple years in his spare time tinkering with prototypes for Uber and devised an app with many of the key features that now generate $11 billion annually in 63 countries. In Kalanick, Camp found a business partner with the ambition and ferocity to turn his vision into a metropolis-altering, rule-bending force. “My goal is to create something that can live beyond me,” Camp says. “Any one person is going to hold a company back if it depends on them.”
Yet, the business quickly became dependent on Kalanick. He was the chief aggressor, investment magnet and ultimate authority on decisions of all sizes. Most insiders, including Camp, acknowledge that Uber would not have achieved its global dominance without Kalanick. But he’s also blamed for a series of legal and moral failures that stained the company’s reputation and led to his ouster as CEO. Camp relinquished his role as chairman during the tumult.
A portrait of Camp emerges from interviews with him, as well as with more than 10 current or former employees and investors, most of whom asked not to be identified, citing the IPO quiet period. He’s a factory of ideas, with a preternatural aversion to confrontation. Some of his former colleagues at Uber say his most severe lapse was allowing Kalanick’s power to go unchecked. At pivotal moments in the boardroom, Camp was indecisive or unreachable. When the board met in 2017 to discuss whether Kalanick should take a leave of absence, Camp was traveling abroad. Camp described it as a “stressful time” but declined to discuss the events in detail. Representatives for Uber and Kalanick declined to comment.
At 40, Camp’s mind is in a near-constant state of preoccupation with life’s daily inefficiencies—some might see them as First World inconveniences—and figuring out how technology could solve them. His work over the last decade includes: an app to circumvent airport security by booking seats on private jets; one for hiring a personal shopper; a travel guide to plan exotic vacations with friends; and a digital currency free from government authority. If Camp had a failure of imagination along the way, it was underestimating Uber. “He’s an incredible idea generator,” says Tim Ferriss, a friend and self-help author who invested in Uber after Camp pitched him the idea at a bar in 2008. “At the time, it was unclear just how significant Uber would become.”
The founding story of Uber, as told in countless interviews and immortalized on the company’s website, is something of a myth. It tells of Camp and Kalanick dreaming up the concept together on a snowy night in Paris, while trying to locate a taxi. Camp describes that evening in late 2008 as “a pivotal moment” for forming a business partnership between two friends but not the beginning. “By that point, the app was already pretty much designed, and that design didn’t change for three years,” Camp says. “Travis loves to get the press and tell the Paris story.”
Earlier that year, Camp met up with Ferriss at an unassuming Irish pub in San Francisco called the Phoenix. Ferriss, who wrote the 4-Hour Workweek, recalls Camp complaining about taxis. They agreed the city had a capacity problem. Camp was having a harder time than most, though. He often called multiple cab dispatchers at once and took the first car that arrived. The taxi companies didn’t like that, and most took steps to ban his phone number. “I would just be late for dinners because I would call a yellow cab, and it wouldn’t show up,” Camp says.
Camp eventually resorted to taking black cars, which is where the idea for Uber was formulated. Sitting at what Camp remembers as “some sort of pub,” he showed Ferriss an early mock-up of the app. Ferriss was impressed, and Camp suggested they could use it to get around town. “I didn’t really think about the scale that it would reach,” Camp says. “It wasn’t some master plan of, ‘Oh, we’re going to have this huge company.’ It was more like, ‘Hey, this would be a cool app that would save my friends time.’”
Uber didn’t invent ride-hailing. Similar apps called Taxi Magic and Cabulous already existed. Camp says he checked them out but found the services hard to use and never succeeded in taking a ride. He wanted Uber to exist, but he had a day job at StumbleUpon, which he’d been working on since 2001. Near its height, more than 40 million people used the service to wander around the web. You clicked a button on your browser, and it transported you to a web page that aligns with your interests—a game, an educational website, a news article. He sold the business to EBay Inc. in 2007 for $75 million and remained CEO.
In 2008, Camp crafted a PowerPoint presentation to sell the Uber concept to investors. It contained many of the hallmarks of today’s app: a “one-click car service,” automatic dispatch using GPS and five-minute pickup times. But the document also suggests Camp wasn’t thinking big enough. He saw the potential market for the product as “professionals in American cities.” He pitched it as a disruptor of luxury car services, not as a replacement for taxis, public transportation or car ownership.
After the discussion in Paris, Kalanick agreed to advise on the project. Camp wanted to buy a fleet of black cars, and Kalanick helped convince him to furnish existing car services with the app. Kalanick helped recruit Ryan Graves as Uber’s first CEO with a tweet promising “BIG equity, big peeps involved.” Graves spent his first six months getting the business off the ground, while Camp footed the bills. Graves recalls getting his first paycheck at Uber from Camp.
By 2010, Kalanick had realized the enormity of Uber’s potential and decided to take over Graves’s job with Camp’s blessing. “I’m frickin’ pumped,” Kalanick wrote at the time. Graves moved to a lesser operational role and reciprocated his new boss’s enthusiasm in a statement: “I’m super pumped about how well-rounded the team has become with Travis on board full time.”
As CEO, Kalanick made Uber famous, and then infamous. In many ways, he couldn’t be more different from his co-founder. He’s brash and details-oriented, eager to get in a fight and willing to bend the rules. He’s the kind of person investors want at the top of a startup trying to dislodge an entrenched industry like taxis. Camp is not that person. He has a Ferdinand the Bull-style aloofness. He doesn’t want to fight anyone. He spends a lot of time wondering why the world works the way it does and has the optimism to believe it can change.
Venture capitalists say their early investment in Uber was a bet on Kalanick. He led fundraising efforts for much of the company’s life, amassing more private capital than any U.S. venture-backed startup in history. “In the first couple years, I was doing everything,” Camp says. “When we started to raise external capital and Travis joined, then it started going faster.”
While Kalanick was trying to take over the world, Camp was attempting to salvage his first hit. StumbleUpon was languishing at EBay. Meg Whitman, who advocated for the deal as CEO, stepped down less than a year later. (She would later be considered a front-runner to replace Kalanick at Uber, before losing the job to the current CEO, Dara Khosrowshahi.) EBay hired Deutsche Bank to explore a sale of StumbleUpon. Camp orchestrated a spinoff, where he would raise venture capital and remain in charge.
Occasional attempts to stay involved with Uber could make Camp at times seem out of touch to colleagues. One early Uber employee says Camp was sending over suggestions about the app’s design around the time the company was fielding a cease-and-desist letter from officials in San Francisco.
By 2013, Camp decided to search for his next big idea. He came up with the idea for a startup studio called Expa. It would run the Uber playbook on a hodgepodge of Camp’s ideas. He joined with Jay-Z to back a startup attempting to replicate Uber for air travel. He helped create an app to address his distaste for researching and shopping for products online. He devised a tool for selling homes after he was outbid on a house and wasn’t given the chance to counter. None of the ideas worked out as envisioned. “When you think of product and design, that’s definitely where he has a lot of passion,” says Jonathan McNulty, CEO of the home-selling startup Haus, which is now exploring different ideas at Expa.
Meanwhile, Camp’s original company, StumbleUpon, was still stumbling, and he bought back a majority stake from investors in 2015. Then he shut it down and referred visitors to StumbleUpon’s website to a similar app he built called Mix. The app has never cracked the top 250 in any country, according to research firm App Annie, but it’s the idea he can’t let go.
Although Camp was still chairman of Uber around this time, many key employees say they hardly knew him. They might have seen him at big corporate events, such Uber’s five-year celebration of its San Francisco debut. But he skipped attend the glitzy Las Vegas staff meeting in 2015 that featured a performance by Beyoncé and speeches from top executives.
By 2017, Uber investors decided it was time for a change. They accused Kalanick of drawing the company into a string of needless scandals: an ill-advised acquisition that led to a megawatt lawsuit from search giant Alphabet Inc., a pervasive office culture of sexism and misconduct, the mishandling of a medical report for an Indian customer who was raped by an Uber driver and a verbal confrontation between Kalanick and a driver that was caught on tape. As a group of major investors moved to push Kalanick out, Camp demurred.
Once Kalanick was dethroned, Camp seemed to find his resolve and began to distance himself from his co-founder. Kalanick quickly came to regret his decision to step down and canvassed shareholders to see if he had their support—and votes—to reinstate him. Camp wrote an email to employees dismissing the effort: “Travis is not returning as CEO.”
Camp further solidified Kalanick’s estrangement from the company by supporting the elimination of multi-class stock, which gave outsize power to founders and early investors. The move reduced Camp’s own sway over Uber in the process. Camp also agreed to cede his chairmanship to an outsider unaffiliated with either founder. Asked about Kalanick’s tenure, Camp says: “I think he was amazing at the first five years.”
Current leaders express little reverence for the company’s past. For the IPO prospectus, Khosrowshahi penned a “CEO letter,” a twist on a Silicon Valley tradition typically reserved for company founders. Camp and Kalanick were given short biographies in the filing for their roles on the board. Neither is expected to receive an invitation to ring the ceremonial opening bell at the New York Stock Exchange on Friday.
Camp says he plan to celebrate the stock debut from the sidelines in New York. “I don’t care if I’m one of the people ringing the bell. I never even asked to,” he wrote in an email. “The early team and drivers deserve the recognition here. They made Uber what it is today.”
Khosrowshahi is determined to convince investors that Uber is a different company today—a diversified business that’s ethically run and capable of someday turning a profit. In Camp’s view, Uber hasn’t changed all that much: “You can get in, put your phone away or check email. In the end, you get out. You basically get to where you want to go with low stress in a time-efficient way. That has not really changed, and that is still our bread and butter.”
For all his foresight, Camp did miscalculate one aspect of the business. Over the past three years, Uber has totaled operating losses of more than $10 billion. In his original presentation to investors in 2008, Camp described Uber as “profitable by design.”