Uber, the ride sharing company, is looking to snag a $1 billion credit line from a consortium of banks, sources told The Wall Street Journal in an article published Friday (May 22).
In a process that might signal the eventual move to a public offering, Uber has been in touch with several large banks, WSJ reported, with the number pegged at as many as seven institutions, people familiar with Uber’s activities said, and the company is seeking info on lending terms.
The credit line, or revolver, would not be necessary to fund operations. Uber’s recent funding rounds (it now has secured roughly $5 billion in debt and equity over the past few years) value the company at more than $40 billion, and convertible offerings of course have part of their value locked up in equity prices which in turn have to be tied to some sort of market price.
Despite the obvious signs, such financing may indeed lead to public equity offerings, at least one source told WSJ an IPO was not imminent and would likely not be in the cards until next year – at least.
The strategy echoes that of other large tech companies, including Facebook, wherein finalizing large credit pacts served as a steppingstone to the public markets. And Twitter, which got a $1 billion lending commitment before its own IPO, shows that banks may not necessarily demand that a company be profitable before they open their purses.
WSJ wrote that banks that do indeed commit to funding companies looking to come to market often get to work on bringing the IPOs to fruition, and thus are able to offer favorable terms on the debt.