Uber’s CEO Didi Khosrowshahi announced his plans to keep Uber on track to go public (IPO) in 2019. Toyota’s most recent investment in the company values the company at nearly 72 billion USD. Uber’s funding and valuation are great reasons to warrant future success for the company, but how will going public impact the company itself and its users?
“I think Uber will see a lot of interest from investors but there are two things they need to be wary of: they are an asset light company so they don’t need a lot of capital. So why IPO? Also, they will come under the quarterly reporting requirements like Tesla and they will need to communicate their strategy to investors which takes away some secrecy,” says Himanshu Sharma, former University of Pennsylvania graduate and Ford Scholar and current analyst.
Sharma’s opinion is an implied belief about every company going public. Obviously, if any company were to go public, their plans would be more publicized and they would lose some pieces of their competitive edge. However, that could also be a good thing. If the company’s (in this case, Uber) strategy is more publicized, consumers are at least more aware of what they are using and how to respond as a result. Although not beneficial for company from an abstract point of view, going public definitely aids the consumer in that they can increase the extent of their research into the Uber and determine if they will stay as users.
As a result, corporate policies taken in either a negative or positive light by the public can aid the company in that they can improve their research on what the consumer does/does not want. Being private prevents Uber and other companies from truly evaluating what their consumers want. As a public company, however, companies, even if resistant, are essentially forced to tailor their product to what the consumer wants be due to their competition. For instance, Uber is planning on expanding into the self-driving automobile industry, but specifically self-driverless taxis/trucks. Because of the staunch public debate about this technology, Uber can now easily decide whether now is the time focus their resources on the development of the technology or to wait and focus on other ideas.
In my eyes, I see Uber starting off blazing hot due to the "IPO effect" as well as other asset light companies who far exceeds initial price projections during the IPO stages (ex. Alibaba). However, due to the "IPO effect", the market will focus its attention elsewhere and Uber will face a slight rough patch. I believe that patch will be insignificant as it is solely based on technical analysis.
From a fundamental perspective, I believe Uber is poised to dominate certain industries but falter in some. Obviously, they have revolutionized private transportation, and I believe they will still be on top of that industry due to stable leadership (Dara) and an actual CFO to finally prioritize their finances. However, given that Uber has far less resources to allocate to the self-driving automobile industry than other companies (i.e. Toyota and Mercedes), and given that the market is already so saturated and only worsened by the presence of tech behemoths like Google, I believe Uber will not be able to keep pace in this industry. However, I believe Uber will still make noise in this industry due to (as mentioned before) corporate vision and early recognition of where the automobile industry is going. On that note, although they have less resources to allocate than other car companies, they just invested over $150 million in their self-driving business in Toronto, so clearly self-autonomous vehicles are a primary component of their future business model.
My Condensed Take:
Buy Uber a few weeks after its IPO and just hold. This company is revolutionary and as long as leadership is consistent, I see no reason why this company can't present significant returns within its first few years.
Disclaimer: Reddyfinance.com or Rishabh Reddy are not responsible for any financial losses. This site is purely opinion based of personal research. Financial decisions should not be made solely off the information on this site.