The Uber Technologies Inc. logo is seen on the windshield of a vehicle in New York. (Photographer: John Taggart/Bloomberg)

Uber Valued at $120 Billion in an IPO? Maybe

(Bloomberg) -- Uber Technologies Inc. has been told by banks that it could be a $120 billion company when it goes public. Investors will be the ones who decide, though.

That eye-popping valuation was sketched out to the company by Morgan Stanley and Goldman Sachs Group Inc., said people familiar with the matter who asked not to be identified because the discussions were private. Pitches from firms jockeying to convince a company that they’re the best to lead the deal are typical in the IPO process.

But if large consumer tech IPOs of the past couple years are any guide, that 12-digit number should be taken with a grain or two of salt. Both photo-sending app Snap Inc. and Chinese smartphone-maker Xiaomi Corp. had eyes on big valuations, only to see their numbers cut by half when it came to actually selling shares to investors.

Snap’s public market capitalization was seen as being as high as $40 billion five months before its listing last year, a person familiar said at the time. Its March 2017 IPO ended up valuing the company at about $20 billion, which has since sunk to $9.3 billion. Xiaomi is worth just $35.4 billion after going public in July in Hong Kong at a $54 billion valuation, which was barely half of the $100 billion target from from a few months earlier.

For investors, Uber’s valuation will largely come down to its financials. In a bond offering now being wrapped up, the company said it expected to generate $10 billion to $11 billion in net revenue this year, without logging a profit for at least more three years.

At a $120 billion, Uber would be valued at more than double the average of companies in the Nasdaq 100 Index on a price-to-2018 sales basis. It gives the ride-hailing company a multiple of about 12 times, compared with an average of 4.8 times for the index.

While that measure is imperfect -- the valuation will be based on future years’ financials, which should continue to grow -- it does give a sense for how richly valued the projections are.

Uber and its smaller competitor, Lyft Inc., intend to list next year, said people familiar with their plans. Lyft’s underwriters proposed a valuation range of $18 billion to $30 billion, with a target of $25 billion, one of the people said. Lyft generated $563 million in revenue in the third quarter, up from $300 million in the same period a year earlier, one of the people said. Its full-year revenue estimates weren’t made clear.

What is clear is that Uber and IPO-bound competitor Lyft will compare their own values to GrubHub Inc. The $11 billion food-delivery company trades at 11.2 times its 2018 revenue estimates with one major difference: it’s profitable and has been since at least 2011.

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