Home Uber Why Uber Failed in Its I.P.O

Why Uber Failed in Its I.P.O


What began with a big promise ended up disappointing investors. So what really happened with the Uber I.P.O that was estimated to be around 120 billion dollars only to be a fraction of that figure in the end? Michael de la Merced and Mike Isaac of the New York Times looked into what went wrong with the I.P.O and concluded that it was as a result of mismanaged expectations. At the same time they concluded that there were a lot of blamings to do. The two discovered that problems for Uber began when overambitious valuations were made. This began when the company was valuated to around 120 billion dollars by bankers from Morgan Stanley. Things got worse when insider information got out that the company had been valuated that much. Investors saw an opportunity to make quick wealth. The two also discovered that the named figure of 120 billion dollars was very important to the current chief executive officer Dara Khosrowshahi who came on board in 2017. It was revealed that should the company have a valuation of 120 billion dollars in the next three months he would have received a payout of 100 million dollars. The least that he could have received was 80 million dollars. The two also revealed that Uber business was suffering for various reasons including competition from other ride sharing companies.

Things got worse for Uber when investors refused to spend their money on the I.P.O. Many investors were aware of the company’s suffering business as some owned share in rival companies such as Lyft while others had already invested in Uber. These investors understood that buying more shares from the company would be more trouble as they would hold their wealth and would have a tough sell considering the high prices that the shares were been sold at. It was later revealed that the board did not fully support the I.P.O. leaving the task to the pricing committee that was led by the chief executive officer. The fact that the board did not fully support the offering might be another reason why the sale suffered. The I.P.O came at a time when the US is at loggerheads with China. The Trump administration banned the use of Huawei products in the country and this affected Uber directly. The administration prevented American companies from using foreign made equipment saying that some posed a threat to the national security of the United States.