Uber is set to publish its prospectus for an initial public offering (IPO) that could value it at $100 billion. The company looks to raise about $10 billion. This could be this year’s biggest IPO filing and among the 10 largest of all time. That compares with the $2.3 billion raised when Lyft LYFT went public late last month with a valuation of $24 billion.
The Lyft IPO had a dazzling market debut but shares have lost around 23% since then. And with another ride-sharing company Uber jumping on the bandwagon, the spotlight has suddenly shifted. Not only this, Lyft’s shares lost 10.9% on Apr 10 on prospects of Uber’s IPO filing on Apr 11.
Are Uber’s Financials Sound Enough to See a Smooth Market Debut?
Per Bloomberg, Uber announced in February that it generated $50 billion in gross bookings in 2018, up about 45% year over year. But the growth is decelerating. Of the $11.4 billion of net revenues in 2018, only $3 billion came in the fourth quarter, up only 2% from the previous quarter. This number results in a year-over-year quarterly growth rate of 25%, well below the 38% rate for the third quarter. Though Uber is a growing company and expanding into areas like food and freight delivery and scooters and bicycles, it has its own share of risks.
Nevertheless, this doesn’t mean that the Uber IPO will meet the same fate as Lyft. Potential investors who are betting high on Uber’s growth story might be unaffected by Uber’s decelerating growth.
Investors should note that initial upheaval in public markets is not uncommon for tech heavyweights. Facebook Inc.’s FB shares also took a hit shortly after the IPO, taking it almost a year to cross the launch price (read: Internet ETFs & Stocks Top Bull Market: Will the Rally Continue?).
Also, investors should be happy with the fact that though Lyft has lost in the past month, the IPO ETF Renaissance IPO ETF IPO hasn’t. The fund gained about 2% in the past month and 32.8% so far this year.
Moreover, a basket approach could give investors diversified exposure and lessen company-specific concentration risks. Pinterest is also hitting the market soon. It is planning to offer 75 million shares at $15 to $17 and raise about $1.3 billion from its IPO expected next week under the symbol "PINS” on NYSE. So, through ETFs, investors could gain an exposure to high-flying tech IPOs of this year (read: Pinterest Tones Down IPO Pricing: Will These ETFs Benefit?).
ETFs to Watch
Though the following ETFs don’t own any stake in Uber and Pinterest, the IPO might see its addition in a number of funds in the near future. Lyft has already entered the fund IPO (read: Will IPO ETFs Sizzle in 2019?).
So, investors can tap ETFs like First Trust US IPO Index Fund (FPX), IPO andFirst Trust Dow Jones Internet Index Fund FDN to cash in on the latest tech IPO euphoria. Even if Uber IPO fails to see success, IPO and Internet ETFs’ broad-based exposure is likely to save one’s portfolio (read: Uber, Lyft, Slack, Pinterest, Other Hot IPOs & ETFs: What You Need to Know).
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