Last Week, Travis Kalanick stepped down as Uber’s CEO. Could this development mean that the Uber IPO is one step closer?
Kalanick is credited with the explosive growth of the ride share behemoth that is supplanting taxi services worldwide. His execute first, get permission later mentality enabled massive penetration into the global transportation market.
Questions about his ability to lead the company lingered after a blog post by a former employee contained allegations of HR ignoring sexual harassment cases. Then an embarrassing dashboard camera video exposed Kalanick’s combative nature.
Since then it’s been all downhill.
Kalanick isn’t the first combative CEO to start a massive business. Both Steve Jobs and Bill Gates weren’t known as boardroom angels. They were tough negotiators, demanded excellence from their teams, and weren’t afraid to challenge regulators.
Kalanick was in no hurry to IPO after seeing Facebook’s stock initially crumble after its IPO. Though Kalanick was generally respected by Uber’s employees, the lack of liquidity for share owners decreased moral. Early employees with options and restricted stock find it difficult to leave due to the high cost of exercising options and the massive tax bill. Though Uber is considering changes, a liquidity event is long overdue.
But he’ll remain on the Board of Directors.
IPO investors will be salivating when the Uber S-1 filing hits the Feed. That filing is probably the most anticipated document in all of equity investing. When it’s released, the countdown to the IPO begins.
However, now Uber lacks leadership. A new leader will need to take the helm before the company can present it’s case to IPO investors.
Early venture capital investors are craving liquidity. Employees are desperate to move on with their careers, start new businesses, or simply cash out and travel the world.
The JOBS Act of 2012 opened up equity crowdfunding and Reg A+ IPOs, but it also made it easier for private companies to stay public by increasing the number of ‘holders of record’ from 500 to 2000.
Facebook was forced to IPO before the law was enacted.
Uber is below that threshold and if desired, can continue to find private funding. That makes regulatory filings less onerous, another advantage to staying private.
How to get Shares of the Uber IPO?
We all want a piece of the Uber IPO. Not just readers here. EVERYBODY wants in. It’s going to be a difficult task.
Even if you meet the eligibility standards of the big brokerage houses that typically get allocations for customers, you’ll need to be in the higher echelons of eligible investors.
If you have assets in multiple brokerages, start consolidating your assets to Fidelity, Schwab, or TD Ameritrade now to meet eligibility. They are the most likely candidates for receiving allocations.
Motif Investing might have a shot if J.P. Morgan is the underwriter. But don’t hold your breath. Allocations have been small for higher demand IPOs.
Perhaps ClickIPO will be our best bet. ClickIPO is a smartphone app expected to be up and running in the second half of the year. They’ll make it easier for underwriters to distribute shares to smaller investors. ClickIPO plans to distribute to their users based on an Investor Score.
The Investor Score rates each IPO investor, primarily by how long they hold onto IPO and secondary shares. If ClickIPO users can build up their score ahead of the Uber IPO, their chances of getting allocation may increase.
Perhaps early users of the app can build a strong score and be at the front of the line should Uber IPO shares get allocated to ClickIPO. But they are still a startup, so it remains to be seen what kind of allocations they’ll receive from underwriters.
On the plus side, Uber was last valuated at $70 billion. So there will be a lot of shares to go around. And plenty of employees will be looking to sell.
However, as these liquidity events usually transpire, a lockup period will likely be attached to the IPO, delaying employee’s attempts to get out early. Snap shareholders are still waiting for their chance to sell as the stock price has fallen from its peaks.
Once they sell, they’ll still be faced with a massive tax bill and the challenges of the West Coast housing market. So it’s not all roses for employees.
Since so many employees will be locked up for a while before selling, there may be an opportunity to buy the stock below the IPO price before growth really kicks in, like we saw with Facebook.
With Kalanick gone as CEO, I’m more optimistic that we’ll see that coveted S-1 sooner rather than later. However, I’m less inclined to actually invest in Uber for the long-term without him leading the way. He’s led an amazing growth story.
As Uber board member Bill Gurley said in a tweet:
There will be many pages in the history books devoted to @travisk – very few entrepreneurs have had such a lasting impact on the world.
— Bill Gurley (@bgurley) June 21, 2017
When new leadership has stabilized, we’ll have a better idea of the road forward.
Usually, a respectable publication such as Bloomberg will pen an article pre-announcing the filing. “Uber Intends to File for IPO this year” or something like that. Once we get that story, keep your eyes open.
So we’ll keep watch on the S-1 Feed for the Uber filing. But it’s much more likely you’ll find about the filing from every news source in the country before you hear it from me. This IPO will be a monster, both on the trading floor and in the media.
We’ll do our best to find a way in. But the most likely outcome is that only the wealthiest among us will receive a small allocation.