Uber, the ride-hailing company, filed its IPO prospectus as it indends to go public in May. Currently, news flow suggests Uber will receive a public markets valuation of about 100 bln. USD, lower than its last private funds raising round valuation of 120 bln. USD.
Is Uber worth 100 bln. USD? What is the intrinsic worth of the company? I think Uber is currently worth about 70 bln. USD.
Why? First, because Uber lost 1.8 bln. USD on revenue of 11.3 billion USD in 2018 excluding certain items according to its prospectus. Second, its revenue growth is slowing significantly. Basically, Uber's current valuation is a classic technology bubble.
As Warren Buffett said, when you do not see who the fool is, the fool is probably you. Apparently, too much private Venture Capital money is chasing too few opportunities, That is why the value of companies like Uber gets inflated so much. It is very reminiscent of the late stages of the 2001 dot com bubble. Yes, now the IT bubble companies at least have revenue, but their valuations are still unrealistic and many investors will get burnt.
Actually, there are technology companies listed on public markets in the USA and elsewhere, which are reasonably valued. I think some examples are Microsoft, Spotify, Lending Tree, Dropbox, Box, Intel, Oracle etc. Actually, many technology bubbles like GroupOn, Zynga, GoPro, DDD, FitBit have quietly popped. This is an interesting development, as it suggests the market could actually weed out the underperformers without crashing too much. Will it turn out this way? No. The major US stock indices and other global stock markets will fall circa 30-40% from their highs. This will be a healthy correction, the creative destruction of capitalism, which will give birth to the new Googles, Amazons, Facebooks and Apples of this world. This creative destruction is what keeps the world moving forward. The most efficient allocation of resources. Economics. Free market capitalism!
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Petar Posledovich
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