Uber may be planning to price its shares more modestly than expected in its eagerly-anticipated float as it looks to learn from the torrid trading of its smaller rival Lyft.
Analysts have warned the ride-hailing giant may need to lower its expectations for its initial public offering (IPO), after Lyft’s poor performance sparked fears big tech firms are being overvalued.
Lyft priced its IPO at $72 per share last month, having increased its initial target range, giving the San Francisco-based company a valuation of more than $24bn (£18.4bn).
Despite a sharp increase on its first day of trading, Lyft’s stock has since plunged to a low of just over $60.
Uber, which is expected to sell as much as $10bn worth of stock when it floats in the coming weeks, will be keeping a close eye on its rival’s performance.
Michael Hewson, chief market analyst at CMC Markets UK, described Uber’s mooted $100bn valuation as “optimistic” and warned the firm will have to temper its expectations due to Lyft’s rocky ride.
“Whatever you think about Lyft, you can pretty much double it for Uber,” he said. “There are an awful lot of concerns about its margins compared to its valuation.”
While Uber holds a much larger market share than Lyft, the similarities between the firms mean investors and analysts believe their performances could be closely linked.
Concerns have also been raised about a lack of clarity over how to measure the performance of the tech firms, both of which generate large revenues but are yet to turn a profit.
“There’s no discernable way these companies are valued,” Brian Hamilton, founder of data firm Sageworks, told Reuters.
“What you’re really buying into is the long-term ability of the company to capture lots of sales and hopefully get profitable at some point.”
CMC analyst David Madden said Uber will need to tread a fine line between pricing its shares too high and eroding confidence with a significant price reduction.
“You can’t hoodwink the market forever,” he said. “Managing expectations is what it’s all about; the last thing you want is a rerun of Lyft.”
Despite the uncertainty caused by Lyft’s troubled trading, Uber will be hoping it can use its rival’s misfortunes to its advantage.
The firm is expected to make its IPO registration with the US Securities and Exchange Commission (SEC) publicly available later today, and will kick off its investor roadshow in the last week of April.
The reports will offer a first in-depth insight into Uber’s financial details, which analysts say will be key for investor confidence.
Read more: Uber IPO 'seeks to sell $10bn of shares'
“Uber is clearly a familiar name to millions of cab customers, but a successful and disruptive app doesn’t necessarily make for a good investment,” said Lath Khalaf, senior analyst at Hargreaves Lansdown.
“That’s why Uber’s listing documents are going to be seriously scrutinised, because they’ll give investors a proper look under the bonnet of the tech giant’s operations for the first time.”