Uber IPO prospectus shows ride-hailing revenues stalled

Uber revealed the intense competitive pressures on its ride-hailing and food delivery businesses in a prospectus for its upcoming initial public offering, telling potential investors that it will continue to spend heavily in a battle for market share.

The decade-old US car-booking company took the wraps off its filing with the US Securities and Exchange Commission on Thursday, revving up for the most-anticipated IPO of the year and what is expected to be one of the largest US technology listings ever.

The prospectus painted a picture of a company burning through tremendous amounts of money to maintain its market share as growth in its core businesses stalls.

Overall, revenue reached $11.3bn last year, Uber said, showing explosive progress for a company that brought in just $495m in 2014.

But growth slowed in its oldest and biggest business: ride-hailing. Revenue in that business, excluding items such as some bonuses paid to drivers, plateaued at $2.3bn in the fourth quarter, little changed from the previous three months.

The new financial details demonstrate how competition remains fierce among rival car-booking apps including Lyft in the US and Ola in India, which spend heavily to subsidise fares and recruit drivers.

Uber said it expected those dynamics to persist, pressuring margins in the near term in order to keep its hold on a majority of ride-hailing bookings in every region where it operates.

“We will not shy away from making short-term financial sacrifices where we see clear long-term benefits,” wrote Dara Khosrowshahi, chief executive, in a letter included in the prospectus.

Uber recorded operating losses of $3.03bn in 2018, excluding gains from the sale of businesses in Russia and south-east Asia, meaning the company has lost $12bn from its operations in total since 2014. Cash burn eased from $4.5bn in 2016, but the company still bled $2.1bn last year.

Uber is also investing to build up newer businesses, including its food-delivery unit Uber Eats, its Freight trucking arm, and bike and scooter rentals.

Eats has emerged as a bright spot, with revenue surging from $103m in 2016 to $1.46bn in 2018, accounting for 13 per cent of Uber’s total revenue. But as with rides, revenue growth for Eats slowed over the course of last year as Uber pressed to gain market share.

Uber is a once-in-a-generation company, and the opportunity ahead of it is enormous

The company is aiming to raise $10bn from its IPO and recently told some of its investors that it could be valued at $90bn to $100bn, according to people familiar with the matter. The company was last valued at $76bn in a private fundraising in August.

Thursday’s filing did not include details on the size of the offering or anticipated price of shares, including only a place holder amount used to calculate listing fees. But it did reveal that the IPO would include both shares offered by the company and some existing shareholders. It did not say which shareholders were planning to sell.

The company expects to kick off its investor roadshow on April 29 and list its shares on the New York Stock Exchange on May 10, according to people briefed on the plans. The IPO is being led by Morgan Stanley and Goldman Sachs.

Like its rival Lyft, which listed last month, Uber also included a programme to offer shares to drivers. Uber said it would pay $300m in bonuses to about 1.1m drivers who have completed at least 2,500 trips for the company. Those drivers will have the opportunity to buy shares at the IPO price.

Mr Khosrowshahi’s letter addressed some of the governance and culture issues that have dogged the company and which led to the ouster of Uber’s founder, Travis Kalanick, from the chief executive position in 2017.

Mr Khosrowshahi said becoming a public company meant taking on “even greater responsibilities” as Uber pursues a mission he described as “setting the world in motion”.

“Some of the attributes that made Uber a wildly successful start-up — a fierce sense of entrepreneurialism, our willingness to take risks that others might not, and that famous Uber hustle — led to mis-steps along the way,” Mr Khosrowshahi said. “In fact when I joined Uber as CEO many people asked me why I would leave the stability of my previous job for one that was anything but.

“My answer was simple: Uber is a once-in-a-generation company, and the opportunity ahead of it is enormous.”

In a letter of his own, Ronald Sugar, chair of Uber’s board, touted the merits of the company’s one share-one vote structure, a departure for tech start-ups, which typically use a dual class structure that gives founders and early investors more votes per share.

“World class governance will be our north star,” he wrote.