Uber Technologies Inc. has been valued at $120 billion pre- IPO by the reputable company, Morgan Stanley and Goldman Sachs Group Inc.
The news was revealed by people who preferred to stay anonymous because of the private nature of discussions had. Such valuation typically happens with companies looking to go public in the IPO process.
The pattern with large tech IPO’s over the years may cut down the estimation though. Both photo-sending app Snap Inc. and Chinese smartphone-maker Xiaomi Corp. had eyes on big valuations, only to see their numbers cut by half when it came to actually selling shares to investors.
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Snap’s initial valuation pre-IPO was $40 billion but its March 2017 IPO ended up valuing the company at about $20 billion, which has now been reviewed down to $9.3 billion. Xiaomi, had an original $100 billion target which was later reviewed to a $54 billion valuation. It is now down to $35.4 billion target.
Investors will be focusing on Uber’s financials to accept its valuation. Uber is currently expected to generate $10 billion to $11 billion in a bond offering in net revenue this year, without logging a profit for at least more three years.
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At a $120 billion, Uber would be valued at more than double the average of companies in the Nasdaq 100 Index on a price-to-2018 sales basis. It gives the ride-hailing company a multiple of about 12 times, compared with an average of 4.8 times for the index.
While that measure is imperfect — the valuation will be based on future years’ financials, which should continue to grow — it does give a sense for how richly valued the projections are.
Uber and its smaller competitor, Lyft Inc., intend to list next year, said people familiar with their plans. Lyft’s underwriters proposed a valuation range of $18 billion to $30 billion, with a target of $25 billion, one of the people said. Lyft generated $563 million in revenue in the third quarter, up from $300 million in the same period a year earlier, one of the people said. Its full-year revenue estimates weren’t made clear.
What is clear is that Uber and IPO-bound competitor Lyft will compare their own values to GrubHub Inc. The $11 billion food-delivery company trades at 11.2 times its 2018 revenue estimates with one major difference: it’s profitable and has been since at least 2011.