- Uber wanted to go public with the $120 billion valuation pitched by bankers at Morgan Stanley and Goldman Sachs ahead of its IPO, but the company ultimately listed with a $75.5 billion market cap.
- One reason is that institutional investors, many who privately owned Uber stock, didn’t want to buy more shares at the higher price, according to The New York Times.
- Uber had taken more than $10 billion from institutional investors and private equity firms, among other investors, according to the report. Many bought their Uber shares at valuations below $61 billion.
- So it wasn’t an easy pitch to get the same institutions to buy more stock at nearly twice the price, according to the report.
- Read more on the Business Insider homepage.
The ride-hailing company, which went public last week with a market cap of $75.5 billion, initially tried to garner a $120 billion price tag in its IPO. That’s the valuation bankers at Morgan Stanley and Goldman Sachs pitched to the company at the start of the process.
The Wall Street Journal reported that figure in October, and it held shape until April, when the company told investors it would aim a little lower at a valuation of $100 billion.
The problem: many of the institutional investors who would have bought large amounts of Uber in the IPO already owned shares through private funding rounds. And those investors were resistant to buying more shares at nearly twice the valuation they had intitially invested, according to The New York Times.
Since 2009, Uber had taken more than $10 billion in funding from mutual funds and private equity, among others, according to the Times. Asset managers such as T. Rowe Price, Vangaurd Group, and Tiger Global Management helped the ride-hailing company raise a $5.6 billion round in 2016 at a valuation of $61 billion.
Those are the same investors who usually buy large allocations during the IPO, which means in many cases, selling Uber’s public shares meant selling its stock to its existing investors.
But it wasn’t just the price that was an issue. The Times reported that slowing growth led some investors to suggest that Uber was priced too high.
As the biggest IPO of the year, Uber’s public offering was highly visible. But it’s not the only high-growth tech startup to take investments from institutional investors.
As high-growth companies stay private for longer, investors such as Fidelity and Dragoneer Investment Group have led more private funding rounds so that they can get more shares at a cheaper price than is often possible after an IPO.
Slack, which is set to IPO in a direct listing in the upcoming weeks, raised $427 million at a $7 billion valuation in 2018 in a round led by Dragoneer Investment Group, along with its existing institutional investors T. Rowe Price and Wellington Management.
UiPath, a private artificial intelligence company, completed a similar round in April, where it raised $568 million at a $7 billion valuation in a round led by the hedge fund Coatue.