Uber Sets IPO Terms While Reporting Deeply Unprofitable Q1

Morning Markets: What grew 18 to 20 percent in the first quarter, but lost $1 billion or more in the process? 

If you answered Uber, well done.

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Today Uber set a price range for its IPO, targeting $44 to $50 per share. The company’s debut could see $10.35 billion in shares sold, including 180 million shares from Uber, and if underwriters exercise the option on 27 million more shares. PayPal “has entered into an agreement with us pursuant to which it has agreed to purchase $500 million of our common stock in a private placement” at the final IPO price.

How does all that shake out in terms of valuing Uber? Axios and CBNC both math it out to $84 billion, give or take a few hundred million. However, CNBC notes that on a “fully diluted basis” Uber’s worth could reach “$91.51 billion on the high end” of its pricing.

Final math will get done when Uber sets a hard price. I suspect that the company would love to raise its range, put more money into its own pocket, and get its final valuation higher. No matter how you calculate Uber’s worth at its current IPO price range it’s a far cry from the $120 billion figure that was been bandied about.

Why? Let’s explore the latest results from the company.

Uber’s Q1 Estimates

In Uber’s updated S-1 filing, the company outlined estimates regarding its first quarter performance. Here’s what you need to know:

  • Revenue between $3.04 billion and $3.10 billion, implying growth of 17.8 percent to 20.1 percent compared to Q1’2018.
  • Net losses of between $1.11 billion and $1.00 billion.
  • Losses from its “Core Platform” of between $180 million and $110 million.
  •  Adjusted EBITDA of -$954 million to -$847 million in the three month period.

In short, Uber’s growth compared to the year-ago quarter has fallen to between a sixth and a fifth, net losses will come in at least a billion dollars, Uber’s core operations aren’t profitable, and the company’s adjusted profit remains starkly negative. #winning

This being Uber, every reported number has several presented definitions. Indeed, Uber has adjusted net revenue (less certain driver incentives), “Core Platform Adjusted Net Revenue,” and more. But no amount of financial doodling can change the narrative that Uber’s growth is slowing while its losses remain both sticky and high.

Uber’s Growth Problem

Uber has hardly grown in the last two quarters and I don’t understand why it isn’t a bigger deal.

Here are Uber’s last three quarters of revenue:

  • Q3’2018 revenue: $2.944 billion
  • Q4’2018 revenue: $2.974 billion
  • Q1’2019 revenue: $3.04 billion to $3.10 billion

Uber grew about 1 percent from Q3 to Q4 in 2018. And it grew 2.2 percent to 4.2 percent from Q4 to Q1. Or, it grew just 3.3 percent to 5.3 percent in two quarters or half a year.

Companies that grow just a few points in half a year do not usually lose billions and billions of dollars at the same time. And it’s not like Uber is carving out a path to profitability, at least as far as we can tell from its voluminous reported financial arcana.

We’ll have more next week when Uber prices and trades, but what an odd IPO. And what a slightly odd lack of shouting about Uber’s effectively stalled expansion. The company’s narrative as a growth company appears to be enough of a wave for it to surf all the way to an IPO with just a reduced valuation as penalty.

What a wild year.

Top Image Credit: Li-Anne Dias.

Update: A previous version of this post erroneously stated that shares included 27 million from extant shareholders in addition to the 27 million exercise option. It has since been updated.

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