Coming into 2017 a main goal of Uber was its initial public offering (IPO), one of the most anticipated of the year. Unfortunately, Uber had some internal issues that had to take precedence. Whilst Snap Inc. (SNAP) and Blue Apron (APRN) had high-profile IPO’s, Uber was busy at the starting line fixing its company culture.
Uber was founded in 2009 by a UCLA drop-out by the name of Travis Kalanick. Over the past 7 years, Uber grew to be one of the largest tech companies and the largest ride-hailing service in the world. The service is currently available in 70 countries with its headquarters in San Francisco. Kalanick had been the company’s chief executive officer up until recently when he was ousted for his lack of leadership and sexual misconduct issues within the company.
Over the past couple months, numerous sexual harassment accusations arose along with many claims that the culture at the company was “frat-like” (AKA- had all the fixings of a dangerous version of Animal House) and disrespectful. Now, that’s not to say that this type of culture has not been found elsewhere in Silicon Valley; most recently a Google employee released an internal anti-diversity memo.
There have been a variety of shocking mishaps regarding Uber in the past year or so. At Uber’s company retreat in Las Vegas, there was an incident of sexual assault towards a female employee by a manager. Secondly, a company director yelled a homophobic phrase at a company meeting, and, finally, an employee threatened to assault an underperforming coworker (with a baseball bat). It is behavior like this that lead Uber to where it is in now; which is practically in shambles. These obstacles not only take away from the overarching goals of the company but, also discourage prospective talent.
Uber’s solution to their company culture problem was to appoint a new CEO. The star-studded candidates included ex-GE CEO Jeff Immelt, Hewlett Packard CEO Meg Whitman, and Expedia CEO Dara Khorowshahi. After much contemplation and the drop out of Jeff Immelt, Khorowshahi of Expedia was conclusively selected as the new leader for Uber. The board decided that Khorowshahi’s small ego and successful track record would be the most efficient at steering Uber’s employees in a brighter direction.
Not only is Khorowshahi focused on changing the repulsive culture in the short run, he also has the longer-term goal of ‘taking Uber public’. Going public, and issuing shares of your company on a public exchange is a huge milestone for a company. As mentioned in previous articles, this time-consuming process comes with its own advantages and disadvantages. Some advantages of going public include, the ability to raise large amounts of capital quickly, the publicity that comes from an IPO and the liquidity of shares from being able to buy and sell ownership rapidly. On the other hand, some disadvantages include the time and expense of the process from hiring an underwriter at an investment bank, the requirement of disclosing and reporting more information to the SEC and the public and the fact that management focuses more on the IPO than the day to day company operations.
Now the reason that all this is important, is the fact that Uber was unable to go public this year due to its internal problems. It would have been catastrophic to throw a company with reckless behavior into the public realm (well, more than it already was). There were some serious issues to be addressed before Uber could look into the IPO process, and thankfully the board realized that, taking the initiative to start fixing its cultural issues. Now that Khorowshahi is in full control at Uber, he can now take the time to restructure the core values shared by employees and rid the company of any lingering issues (like lawsuits) that may inhibit Uber’s future progress.
Once these issues are mended, Uber can look upward and onward to their IPO, which has the potential to be the most stellar offering of the past 5 years. Khorowshahi gave a timeline of 18-36 months, which gives management more than enough time to steer in the right direction. Uber needs to tread cautiously for this IPO, as Snap and Blue Apron both lost substantial share value after their respective offerings.
For example, once Snap Inc. went public on March 1st, 2017 at $17, the share rose substantially at first, to approximately $23.00 within the week, but then declined below their opening price by the end of the next week. Today Snap Inc. trades at about $15, a 13.33% decline. Similarly, Blue Apron, which went public on June 29, 2017, opened around $10 and is now trading at $5 a share, a 50% discount to its IPO price.
To be successful in increasing share value Uber must listen to shareholders and do its due diligence. I fully expect Uber to go public by 2019, assuming all internal issues are corrected, and that this opportunity to go public will only benefit Uber’s employees and users.
Sources:
Balakrishnan, Anita. “Blue Apron shares are basically flat in their first day of trading” CNBC.com. https://www.cnbc.com/2017/06/29/blue-apron-ipo-opening-trade.html. (accessed September 7 2017)
Balakrishnan, Anita. “Snap closes up 44% after rollicking IPO” CNBC.com. https://www.cnbc.com/2017/03/02/snapchat-snap-open-trading-price-stock-ipo-first-day.html (accessed September 7 2017)
De Vycnk, Gerrit. “New Uber CEO Hints at 2019 IPO as He Takes Over Troubled Start Up” Bloomberg.com. https://www.bloomberg.com/news/articles/2017-08-30/uber-looks-to-new-ceo-to-reset-troubled-company-s-moral-compass (accessed September 5 2017)
Fargione, Sam. “Google Employee’s Anti-Diversity Memo Prompts Company Rebuke” Huffpost.com. http://www.huffingtonpost.com/entry/google-employees-anti-diversity-memo-prompts-company-rebuke_us_5987d53ee4b041356ec08f63 (accessed September 5 2017)
Isaac, Mike. “Inside Uber’s Aggressive, Unrestrained Workplace Culture” Nytimes.com. https://www.nytimes.com/2017/02/22/technology/uber-workplace-culture.html?_r=0 (accessed September 5 2017)
Isaac, Mike. “Inside Uber’s Wild Ride in a Search of a New C.E.O.” Nytimes.com. https://www.nytimes.com/2017/08/29/technology/uber-ceo-board.html (accessed September 5 2017)
Johnson. Medeleine. “Will Uber Be The Hottest IPO of 2017?” Zacks.com. https://www.zacks.com/stock/news/271895/will-uber-be-the-hottest-ipo-of-2017. (accessed September 5 2017)
Manjoo, Farhad. “Uber’s Lesson: Silicon Valley’s Start-Up Machine Needs Fixing” Nytimes.com. https://www.nytimes.com/2017/06/21/technology/uber-start-up-lessons.html?_r=0. (accessed September 5 2017)
Roof, Katie. “Most of 2017’s tech IPOs are performing well” techcrunch.com. https://techcrunch.com/gallery/most-of-2017s-tech-ipos-are-performing-well/slide/4/ (accessed September 5 2017)
