Uber IPO: A Lot Will Ride on CFO’s Choice of Metrics, Timing
Finance chief Nelson Chai will have to decide whether Uber will go ahead or trail rival Lyft and what performance indicators to share with investors
Uber Technologies Inc.’s finance chief will play a critical numbers game as the ride-hailing service races toward an initial public offering riding a potential valuation of $120 billion.
Central to the IPO will be the metrics Nelson Chai, who became Uber’s chief financial officer last month, chooses to justify what some experts consider a lofty valuation for a company that doesn’t expect to be profitable for at least three years.
The figures will help him craft a compelling growth narrative that drives discussions with investors and underwriters as he helps determine the timing of the San Francisco company’s roadshow and listing. Mr. Chai’s targets for revenue and rider growth and other performance indicators will set the benchmark for how Wall Street tracks the company.
“You almost have to look ahead a few years and ask, ‘What am I going to look like? And what are my metrics going to be, and will they stand the test of time?’ ” said Jackie Kelley, the Americas IPO markets leader at Ernst & Young LLC.
Mr. Chai won’t have the luxury of time to deliberate because of the uniquely competitive nature of this offering, according to finance chiefs with IPO experience. Uber’s biggest U.S. competitor Lyft. Inc. is also angling to go public, meaning both companies could be presenting to underwriters and investors almost simultaneously. Both Uber and Lyft declined to comment.
If Lyft can make its case first, the numbers it uses could influence Uber’s conversations with investors. Metrics Mr. Chai uses to describe Uber’s expected growth and business drivers might then be compared with figures issued by the company’s smaller rival.
“If you’re the first one out, you can pick your comparables,” said Stuart Miller, CFO of Workiva Inc., who helped take the professional services software company public in 2014. “If you’re the second one out, there’s only one comparable.”
Trailing Lyft to the market could also stoke doubts about whether Uber’s valuation premium over that of Lyft was large enough, he said. Lyft is expected to debut above its most recent valuation of $15.1 billion.
The $120 billion Uber valuation floated by bankers is a leap from its most recent funding round, which valued the company at $76 billion. The new figure likely includes as much as $20 billion in cash Uber and its current backers will raise from the public market, said Jay Ritter, a finance professor at the University of Florida.
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