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Technology Stocks : Investing in Exponential Growth

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From: Paul H. Christiansen	8/9/2016 9:10:00 AM
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Why Uber Might Stalk an IPO Sooner Rather Than Later Uber Technologies Inc.’s recent sale of its China business for $1 billion while acquiring about 20% of rival Didi Chuxing Technology Co. has been widely hailed as a potential step toward an initial public offering. That is true. Uber Chief Executive Travis Kalanick has said the company was losing $1 billion a year in China; eliminating those losses makes an IPO more likely. But it also masks much of Uber’s motivation to go public in the next 18 months. Here’s another factor: the likelihood that Uber’s revenue growth will soon slow significantly, if it hasn’t already. Since Uber’s shareholders aim to fetch the highest possible price for the company, it is better for Uber, which remains unprofitable, to go public before its growth slows too much. If Uber times it right, it can make investors in public markets believe it is a good buy—even at a valuation greater than its most recent $68 billion. “The challenge from an IPO perspective is, Uber is going out at something above $65 billion, so it’s hard to pitch that as a growth story,” says Anand Sanwal, chief executive of CB Insights. wsj.com

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