Five things we learnt from Uber’s IPO prospectus

Uber has unveiled its pitch to investors for its upcoming initial public offering. The filing gives new details on financial performance, growth rates in its businesses, shareholder stakes and which members of management will benefit most from the IPO.

Here are five things we learnt from the prospectus:

1. Executive payday

Dara Khosrowshahi and four other top executives stand to cash in an estimated $380m worth of stock options between them if Uber’s shares perform well after its IPO.

The chief executive was given options over 1.75m shares, potentially worth $170m, as an incentive for sorting out the company and moving it quickly to an IPO after he joined in the middle of 2017. The estimates are based on what the options are likely to be worth if they meet the performance targets.

The stock benefits only pay out if Uber’s stock market value stays about $120bn for a period of at least three months. That is higher than the $100bn valuation that it has told some investors it could be valued at when it makes its stock market debut next month. But the top management team has until 2023 to hit its performance target.

The other executives eligible for the stock awards are:

● Barney Harford, chief operating officer: options over 1.25m shares

● Nelson Chai, chief financial officer: options over 500,000 shares

● Thuan Pham, chief technology officer: options over 250,000 shares

● Nikki Krishnamurthy, chief people officer: options over 200,000 shares

2. A long legal shadow

Uber will offer ample employment opportunities for lawyers for years to come. Among the legal risks it points to: “a number of inquiries, investigations and requests for information” coming from the US Department of Justice, along with other agencies from the US and other countries. One DoJ case is investigating potential improper payments made in several countries, including Indonesia, Malaysia, China and India.

The company also has a tidal wave of claims from drivers who argue they should be treated as employees rather than contractors. In the US, that includes more than 60,000 people who have made, or intend to make, demands for arbitration. At a filing fee of $1,500 for each case, even the costs of dealing with the cases could mount up.

Uber set aside $1.1bn in 2018 to meet penalties and settlements.

3. The cap table

Like Lyft before it, Uber is coming to the stock market with a group of big investors drawn from a much wider pool than the venture capitalists who are traditionally the biggest winners from successful technology start-ups.

● SoftBank’s giant Vision Fund amassed the biggest stake, at 16.3 per cent, after leading a 2017 transaction that enabled some early investors to sell out

● Saudi Arabia’s Public Investment Fund, itself the biggest backer of the Vision Fund, also holds a 5.3 per cent stake directly

● Google’s parent Alphabet rounds out the group of non-traditional start-up investors with 5.2 per cent, its second IPO win this year, after its 5.3 per cent stake in rival Lyft

● Travis Kalanick, the controversial former chief executive and co-founder who still sits on Uber’s board, holds an 8.6 per cent stake

● Garrett Camp, co-founder and director, has 6 per cent

● Benchmark Capital, the venture capital firm that engineered Mr Kalanick’s sacking, has 11 per cent.

4. How big Uber can get

The scale of Uber’s ambitions reaches far beyond the road. The company laid out several total addressable markets for its different businesses, adding up to more than $12tn in market opportunity it hopes to disrupt.

● Personal mobility: $5.7tn, consisting of “all passenger vehicle miles and all public transportation miles in all countries globally” totalling 11.9tn miles

● Uber Eats: $2.8tn, the amount consumers spend at restaurants

● Freight: $3.8tn, the market for freight trucking in 2017

It is this framing that allows Mr Khosrowshahi to say “we are not even 1 per cent done with our work”.

5. Self-driving car effort continues

Uber’s spending on self-driving car technology has probably topped $1bn. The Advanced Technologies Group makes up the lion’s share of the company’s technology research and development spending, which has consumed $1.1bn over the past three years.

But after a fatal crash in Arizona a year ago, the company has fallen behind some of the competition in the race to create driverless cars. “We expect certain competitors to commercialise autonomous vehicle technologies before we do,” it said in its filing.

Despite that, Uber shows no signs of backing off from the self-driving car effort, which management considers an essential part of its long-term plans. The company is in talks about selling a minority stake in ATG to SoftBank and Toyota to help fund the technology development. 

But there is no indication from its filing that the company hopes to do that before an IPO, and Uber has made clear it plans to keep majority control of the initiative for at least the next few years.