Uber Technologies Inc has filed paperwork for an initial public offering, according to three people with knowledge of the matter, taking a step closer to a key milestone for one of the most closely watched and controversial companies in Silicon Valley.
The ride-hailing company filed the confidential paperwork on Thursday, one of the sources said, in lock-step with its smaller U.S. rival, Lyft Inc, which also announced on Thursday it had filed for an IPO.
The simultaneous filings extend the protracted battle between Uber and Lyft, which as fierce rivals have often rolled out identical services and matched each other’s prices. Uber is eager to beat Lyft to Wall Street, according to sources familiar with the matter, a sign of the company’s entrenched competitiveness.
Its filing sets the stage for one of the biggest technology listings ever. Uber’s valuation in its most recent private financing was $76 billion, and it could be worth $120 billion in an IPO. Its listing next year would be the largest in what is expected to be a string of public debuts by highly valued Silicon Valley companies, including apartment-renting company Airbnb Inc and workplace messaging firm Slack. Ongoing market volatility, however, could alter companies’ plans.
The IPO will be a test of public market investor tolerance for Uber’s legal and workplace controversies, which embroiled the company for most of last year, and on Chief Executive Dara Khosrowshahi’s progress in turning around the company.
Khosrowshahi took over just over than a year ago, and has repeatedly stated publicly he would take Uber public in 2019. In August, he hired the company’s first chief financial officer in more than three years.
Together, Uber and Lyft will test public market investor appetitive for the ride-hailing business, which emerged less than a decade ago and has proven wildly popular, but also unprofitable.
Uber in the third quarter lost $1.07 billion and is struggling with slowing growth, although its gross bookings, at $12.7 billion, reflect the company’s enormous scale. Its revenue for the quarter was $2.95 billion, a 5 percent boost from the previous quarter. Its bookings grew just six percent for the quarter.
Uber has raised about $18 billion from an array of investors since 2010, and it now faces a deadline to go public.
An investment by SoftBank that closed in January, which gave the Japanese investor a 15 percent stake in Uber, included a provision that requires Uber to file for an IPO by Sept. 30 of next year or the company risks allowing restrictions on shareholder stock transfers to expire.
Uber has not formally chosen underwriting banks, although Morgan Stanley and Goldman Sachs are likely to get the lead roles, sources told Reuters. Lyft hired JPMorgan Chase & Co, Credit Suisse and Jefferies as underwriters.
The Wall Street Journal reported Uber’s filing earlier on Friday.
History of scandal
Becoming a public company will bring a heightened level of investor scrutiny and exposure to Uber, which suffered a string of scandals when the company was led by co-founder and former CEO Travis Kalanick, who resigned last year.
The controversies included allegations of sexual harassment, obtaining the medical records of a woman raped by an Uber driver in India, a massive data breach, and federal investigations into issues including possibly paying bribes to officials and illicit software to evade regulators.
Khosrowshahi and his leadership team have worked to reset the workplace culture and clean up the messes, including settlements with U.S. states over the data breach and with Alphabet’s self-driving car unit, Waymo, which had sued Uber for trade-secrets theft.
Uber today is a different company than the vision its founders pitched to early investors, which helped it become the most highly valued venture-backed company in the United States.
After concessions in China, Russia and Southeast Asia, where Uber sold its business to a local competitor, and the prospect of another merger in the Middle East, Uber is far from being the dominant global ride-hailing service it set out to be.
Still, Uber operates in more than 70 countries, while Lyft is in the U.S. and Canada, although the smaller company is plotting a global expansion.
Uber has also added a number of other businesses, which are growing but have yet to show sustainable profits, in a bid to become a one-stop mobility app. Those include freight hauling, food delivery and electric bike and scooter rentals. Meanwhile, its self-driving car unit is costing the company about $200 million a quarter, according to investors, but Uber’s program has retrenched since one of its autonomous cars killed a pedestrian in March.
Flag in the ground
The filing by Lyft, which hired JPMorgan Chase & Co, Credit Suisse and Jefferies as underwriters, plants a flag in the ground to go public before larger rival Uber.
San Francisco-based Lyft, last valued at about $15 billion in a private fundraising round, did not specify the number of shares it was selling or the price range in a confidential filing with the U.S. Securities and Exchange Commission (SEC).
Lyft could go public as early as the first quarter of 2019, based on how quickly the SEC reviews its filing, people familiar with the matter said. Lyft's valuation is likely to end up between $20 billion and $30 billion, one source added.
The ride service was set up in 2012 by entrepreneurs John Zimmer and Logan Green and has raised close to $5 billion from investors. While it continues to grow faster than its larger competitor, Uber, it is also losing money.
Earlier this year, Lyft said it had 35 percent of the U.S. ride-hailing market.
"With autonomous cars on the horizon, it is anyone's guess where this sector goes in the future," said Jeff Zell, senior research analyst and a partner at IPO Boutique in Florida.
Lyft in particular is one of the newest entrants to self-driving and has only a small robo-taxi service in Las Vegas using another company's technology. Its investors include General Motors Corp, which holds a 9 percent stake in Lyft that it acquired for $500 million in 2016, but GM has wound down its cooperation with Lyft, choosing instead to acquire the autonomous car company Cruise.
Lyft presents other risks, including unresolved questions about its workforce of independent contractor drivers. A decision by the California Supreme Court earlier this year, which makes it easier for workers to prove they are employees and sets a higher standard for companies to treat workers as contractors, threatens to upend Lyft and Uber’s business models. Both companies face legal battles with drivers over their classification.