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Early Uber investor sees 'the same kind of situation' as Tesla

Heidi Chung

The IPO market is on fire, and one hot name may soon join the party.

Investors waited with bated breath for ride-hailing giant Uber (UBER) to hit the public market. On Thursday, Uber priced its initial public offering at $45 a share, raising $8.1 billion and valuing the company at over $82 billion.

Rival Lyft (LYFTraced out of the gate first when it debuted on March 29, but even with all of the excitement and hype, the stock has been struggling ever since. Lyft’s post-IPO woes have made some investors hesitant about Uber; however, one early Uber investor said before the company’s IPO that its situation was looking a lot like that of electric carmaker Tesla (TSLA).

“[Uber] is a long-term growth stock,” Mitchell Green, Lead Edge Capital managing partner, told Yahoo Finance. “Tesla doesn’t make money either, and I think you have a bunch of people that really like it that are bullish, and a bunch of people that are bearish, and they continually fight it out in the markets. I would expect Uber would be the same kind of situation.”

Like many of its unicorn peers, neither Uber nor Lyft are profitable companies — at least yet. While it is more common lately for companies that go public to be unprofitable, that doesn’t mean it isn’t a concern for investors. Nevertheless, Green argued that investors need to be patient with companies like Uber.

“There are many companies that are not profitable, and you can put Lyft in this bucket too; I somehow think of Tesla,” Green said. “I think there’s going to be a lot of appetite for [Uber] as we already know. Look, eventually it’s got to make profits.”

Looking at Uber versus Lyft, Green thinks Uber is the clear winner. “There is a story here. Lyft is just a company that has a small percent of market share just in the United States. Uber is a business that is way more diversified than just U.S. ridesharing.”

Credit: David Foster/Yahoo Finance

Green pointed to other advantages Uber has, such as Uber Eats. “Uber Eats is growing north of 100% a year. It’s not in the same number of cities and countries as Uber is, [but] it will be eventually. An interesting stat actually is I think almost 50% of people that use Uber Eats are new to the Uber platform, which gives them a huge user base to draw people into their ridesharing as well, so I think it’s just a much more broader global platform.”

This story was originally published on May 7, 2019.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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