Uber Technologies Inc was yesterday set for its Wall Street debut with a massive share offering that is a milestone for the ride-hailing industry and the so-called “sharing economy,” but which comes with simmering concerns about its business model.
The shares were to be priced at US$45 for the initial public offering (IPO), valuing the start-up at more than US$82 billion, according to a filing with the US Securities and Exchange Commission.
San Francisco-based Uber was set to begin trading on the New York Stock Exchange under the eponymous ticker “UBER” in one of the largest IPOs in the technology sector.
Despite the eye-popping valuation, Uber dialed back some of its earlier ambitions for a value exceeding US$100 billion after a rocky start for US rival Lyft Inc.
Analyst Daniel Ives of Wedbush Securities said Uber has the potential grow as it morphs into a more diverse set of services with Uber Eats, Uber Freight and self-driving vehicle initiatives.
“We view Uber’s conservative pricing as a smart and prudent strategy coming out of the box as it clearly learned from its ‘little brother’ Lyft and the experience it has gone through over the past month,” Ives said in a note to investors.
However, some of the risks surrounding Uber and its rivals were highlighted on Wednesday when thousands of drivers turned off their apps in a US-wide strike over pay and working conditions.
The strikes targeting Uber and Lyft highlighted a dilemma for the firms, which have faced challenges from regulators and traditional taxi operators for using a business model relying on independent contractors.
One group protested outside the New York Stock Exchange, with some signs reading: “Invest in our lives — Not their stocks.”
“While we aim to provide an earnings opportunity comparable to that available in retail, wholesale, or restaurant services or other similar work, we continue to experience dissatisfaction with our platform from a significant number of drivers,” Uber said in a filing with securities regulators. “In particular, as we aim to reduce driver incentives to improve our financial performance, we expect driver dissatisfaction will generally increase.”
Ride-hailing companies maintain that drivers are able to thrive and maintain work flexibility, and that their business model would not work if drivers were treated as wage-based employees.
Uber on Thursday said in a securities filing that it had reached agreement with a large majority of the about 60,000 drivers contesting their status as independent contractors and who had instituted arbitration proceedings against the firm.
The company anticipates the total cost of the individual settlements, combined with attorneys’ fees, would fall between US$146 million and US$170 million.
Uber maintained it was sticking to its plans on how it classifies drivers.
“Our business would be adversely affected if drivers were classified as employees instead of independent contractors,” it said.
Global Equities Research analyst Trip Chowdhry forecast that Uber would eventually have to raise ride prices, causing its customers to seek other options.
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