We cannot predict how much the private tech companies will charge when they grow ul to public companies. That goes quadruple for Uber Technologies Inc.
The Lendingkart versus the Capital Float
In the financial analysis, this company is said tp be the most cofounding technology company of the last decade. The business might be a disruptive one over years and now has reshaped the people’s behaviour in most of the countries, sparked the conversations about the job nature and have forced the governments and the transportation planners for catching up.
The investment bankers have sent the proposals to Uber valuing the company at nearly $120 billion in the initial public offering wherein Uber had signalled its plans of holding upto next year.
Only few of them i.e. approximately 40 companies in United States have the stock market values of $120 billion or more.
At Uber’s recent growth rate, its revenue could reach something like $16 billion at this point in 2019. That means if Uber’s IPO takes place next fall, a stock multiple of 7 to 8 times its trailing 12-month revenue gets you to a $120 billion valuation.
That’s not a completely crazy multiple of revenue. Twitter Inc., which isn’t growing nearly as fast as Uber at a fraction of its revenue, is trading at about 7 times its revenue for the past 12 months.
Facebook Inc. is around 8 times. At least until recently, IPO investors have been so eager to own chunks of fast-growing tech companies that they have been happy to embrace promising tech companies with quickly climbing sales but a history of losses, half-baked business plans and other red flags.
Exhibit A: Snap Inc., although that is far from the only example. Of course, it’s tough to compare Uber with what has come before because it’s such a weird animal. The closest comparable public companies are those that connect people who want to buy something with people who want to sell something.
That’s like eBay Inc. (valued at 3 times its revenue for the last year) or the parent company of Priceline (6 times revenue), but of course Uber isn’t quite like those companies either.
The big challenge is it’s hard to confidently say that Uber’s business works under normal conditions — because conditions haven’t been normal for all of Uber’s life. The company has never had to stand on its own feet financially, thanks to a constant stream of cash in the long bounce back from the global financial crisis.
It’s not clear what Uber’s revenue or growth rate would be if it hadn’t been able to burn cash like money is free. Actually, money has essentially been free for Uber.