Uber IPO could value the company at $120 billion

Last Updated Oct 16, 2018 4:10 PM EDT

With Uber expected to go public next year, banks are valuing the company as high as $120 billion, the Wall Street Journal reports. That's nearly double the value this past spring and roughly equal to Ford, GM and Tesla combined.

Uber's IPO would be one the largest in history, but it continues to hemorrhage money. The company lost $800 million in the third quarter, following a $1.2 billion loss in the first half, according to reports. It would likely need to narrow those losses before staging an initial public offering.

Reuters calculated that, after paying driver costs, passenger promos and other fees, Uber keeps about 23 percent of each transaction. It presumably would need to keep more than that to make money; it also could offer more profitable services in addition to ride-hailing. 

An Uber spokesman declined to comment. The company needs to go public by the end of 2019 under terms of an agreement with Japanese conglomerate SoftBank, a major investor. Its smaller competitor, Lyft, is also reportedly gearing up for an IPO next year.

"The really important consideration for both Uber investors and investment bakers is, where would you go from there? Over the next couple of years, you have to have a track record that will need to exceed that market cap," said Steve London, partner in the corporate and securities practice group at Pepper Hamilton. "To justify this huge valuation, they have to show continuing growth, and that's very difficult."

Uber's sky-high valuation hasn't insulated it from a public-perception problem in some cities, where it is blamed for increasing traffic congestion and lowering taxi drivers' earnings. In August, after a spate of taxi-driver suicides, New York City imposed a temporary cap on new drivers joining the platform. London revoked Uber's license to operate in the city last year before allowing it to come back, with conditions.

Boosting the company's valuation is its stake in other ride-hailing services, including Didi Chuxing in China and GrabTaxi in India. Food-delivery service UberEats also operates in about 500 cities worldwide and is valued at nearly $20 billion, according to the Journal. Uber is also investing heavily in developing self-driving technology.

"This is not just a ride-sharing play," said London. "But at the end of the day, the institutional investors are the ones that actually set the price. They will respond, 'Yeah, that's a valuation that I can live with,' or not, and they have to be convinced."