Uber, the ride-hailing startup gearing up to go public via an initial public offering (IPO), is reportedly seeking a valuation of between $80 billion and $90 billion and is getting a $500 million investment from PayPal.
According to a report in Reuters, citing people familiar with the matter, Uber is expected to announce its IPO plans on Friday (April 26). At the high end of its IPO range, it’s below the $120 billion that investment bankers told Uber it could garner in 2018. It is also closer to the $76 billion valuation it had after its latest round of funding.
Meanwhile, The Financial Times, citing a person familiar with the matter, reported Uber is selling around $500 million of stock to PayPal in a private placement. PayPal is getting the shares at the IPO price, noted the report. PayPal is already a payment processor for Uber in the U.S. and in other countries around the globe. The companies are expected to announce an expanded agreement as part of the investment and will look at ways to collaborate including in developing a digital wallet for Uber, noted The Financial Times.
The lower valuation for Uber comes after Lyft, its ride-hailing rival, failed to take off as a publicly traded company. Shares were down, as of Thursday (April 25), 22 percent from its IPO price. Investor concerns about Lyft’s ability to -relateturn a profit have led to the sell-off in shares.
Reuters noted that Uber plans to price its shares between $44 and $50 each, raising between $8 billion and $9 billion. Uber will launch a 10-day roadshow, starting on Monday (April 29), with the company going public in the early part of May. Sources told Reuters that some of the company’s insiders will sell their shares as part of the IPO.
In reference to the PayPal-related activity, PayPal President and CEO Dan Schulman said in a LinkedIn post that, along with the aforementioned $500 million private placement, “since 2013 we have supported Uber’s payments capabilities as their lead payment processing partner in the U.S. and Australia. Today, I am thrilled to announce that we have reached an agreement to extend our global partnership with Uber and intend to explore future commercial payment collaborations, including the development of Uber’s digital wallet.”
With Uber about to be the second publicly traded ride-hailing company in the U.S., some analysts have been warning that it could result in higher fares for customers. Some Wall Street analysts have argued that, as companies like Lyft and Uber go public, investors may not be happy if the two continue to lose money, prompting them to raise prices.
The two ridesharing firms have, for years, slashed prices and offered perks to steal market share from taxi companies and each other. Both have seen revenue surges, but both have also seen mounting losses.
“You have shareholders who want you to generate profits,” said Mitchell Green, founder of Lead Edge Capital, an investor in Uber. “There are lots of different levers, and one of them is pricing. … These companies have more pricing power than people think.”