With the Economy Uncertain, Tech 'Unicorns' Rush Toward I.P.O - IVP

With the Economy Uncertain, Tech ‘Unicornsʼ Rush Toward I.P.O. - The New York Times   12/6/18, 4)32 PM

With the Economy Uncertain, Tech
‘Unicorns’ Rush Toward I.P.O.
By Erin Griffith and Mike Isaac

Dec. 6, 2018

SAN FRANCISCO — For years, Uber and Lyft put off going public. Now, they are
speeding up.

Faced with a volatile stock market and the prospect of an economic downturn next
year, the ride-hailing services have moved more urgently toward an initial public
offering, said four people with knowledge of the companies’ plans, who were not
authorized to speak publicly.

Lyft originally aimed to list its shares toward the middle of 2019, but it began moving
more quickly after the recent stock market sell-off and because of a desire to go
public before Uber, said two of the people. On Thursday, the company, which was
most recently valued at $15 billion, announced it had filed confidentially for an I.P.O.

Uber has also hastened its I.P.O. clock. The company had once said it was looking to
the fall of 2019 to go public, but has pushed that timing up because of concerns that a
recession might be coming, said two people familiar with the plans. Uber could now
go public as soon as next April, they said. Investment banks have told the company it
could be worth as much as $120 billion in an I.P.O.
                      TECHNOLOGY
                              TECHNOLOGY | With the Economy Uncertain, Tech ‘Unico…
The moves by Lyft and Uber indicate how tricky it can be to decide when to go public
at a time when stock markets have been turbulent and the broader economic picture
is muddied. The calculus for when a company publicly lists its shares is often a
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With the Economy Uncertain, Tech ‘Unicornsʼ Rush Toward I.P.O. - The New York Times                    12/6/18, 4)32 PM

moving target, but Uber’s and Lyft’s actions will carry particular weight with a
swath of other highly valued Silicon Valley start-ups that are also preparing to
approach the public markets.

Airbnb, the online room rental company, plans to be ready to go public by mid-2019
though it has not set a formal timeline, said a person with knowledge of the matter.
Slack, the online collaboration company, has said it is readying for a public offering
but has no specific timeline.

         Airbnb plans to be ready to go public by mid-2019, though it has not set a formal timeline.
         Toshifumi Kitamura/Agence France-Presse — Getty Images

“Companies that were talking about 2020 have been told that the window may not be
open as long as previously thought,” said Barrett Daniels, a partner at Deloitte who
advises on I.P.O.s. He said that he was telling companies that “if an I.P.O. is in your
plan, I would probably be getting ready now.”

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With the Economy Uncertain, Tech ‘Unicornsʼ Rush Toward I.P.O. - The New York Times   12/6/18, 4)32 PM

Any stock market debuts of these companies will be the final chapter of the era of
“unicorns,” the privately held start-ups valued at more than $1 billion. Many of these
companies, which were born after the 2008 recession, rode a wave of smartphone
adoption, turning businesses like taxis or grocery delivery into on-demand services.
They also benefited from abundant capital from private investors, which was driven
by low interest rates.

For years, many unicorns were in no rush to go public because they could grow
easily with money from private investors and away from the scrutiny of Wall Street.
In 2016, Travis Kalanick, Uber’s co-founder and then chief executive, spoke for many
tech start-ups when he said at a conference that his company would go public “as
late as humanly possible.” Employees would be distracted by stock price movements,
he said.

Those attitudes have shifted as investors and tech employees have increased
pressure on the companies to go public so that they can cash in their shares.

“The forcing factor is, how do you deal with issues of employee retention?” said Rick
Heitzmann, a managing director at FirstMark Capital, which is an investor in
unicorns such as Pinterest and Airbnb.

But the seesawing stock market, a trade war with China and other countries and
uncertainty over the direction of the economy are all now weighing on I.P.O. decision-
making. Few executives want to take their companies public when investors’
appetite for shares may be ebbing.

“Companies that were waiting for everything to be perfect before going public might
have been better off going when things were good enough,” Mr. Heitzmann said.

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With the Economy Uncertain, Tech ‘Unicornsʼ Rush Toward I.P.O. - The New York Times   12/6/18, 4)32 PM

Sandy Miller, a venture capitalist at IVP, said several companies were meeting with
potential investors far ahead of filing for an I.P.O., in what are known as pre-
roadshow events. “That’s the only way to really know what kind of receptivity you’re
going to have” from the public markets, he said.

Mr. Miller said that he expected a robust year for I.P.O.s next year, but that
companies may not want to wait until too late in the year to file. “There are certainly
some storm clouds on the horizon,” he said.

Some unicorns are sidestepping the unpredictability altogether. WeWork, an office
rental company valued at $45 billion, has been widely named as an I.P.O. candidate.
But in November, the company agreed to sell an additional $3 billion of shares to its
main investor, SoftBank’s Vision fund. That deal has allowed WeWork to push plans
for a public listing further into the future, said a person familiar with the company.

For Uber and Lyft, the biggest question they face from public market investors is
whether their businesses can be profitable. Expanding a ride-hailing service requires
outlays to recruit drivers in multiple cities, which can quickly get expensive. Uber
said last month that it lost $1.07 billion in the third quarter, as it spent to invest in
new areas such as bicycles, scooters and freight shipments.

Inside Uber, Dara Khosrowshahi, the chief executive, has raced to prepare the
company to go public. Over the past year, the company has overhauled many of its
internal processes, from items as small as creating more formal systems for expense
reports to global safeguards that ensure legal compliance in every area where Uber
operates.

Going public sooner could give Uber a number of advantages. It would mean raising
fresh outside capital, providing the company ammunition to pursue acquisitions and
other opportunities. And it would enable Mr. Khosrowshahi to potentially reshape

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Uber’s board because current members can be asked to leave when there is a
liquidity event like an I.P.O., according to the company charter. Uber’s board has
grappled with a history of infighting.

Lyft is likely to still go public ahead of Uber because it has already filed for an
offering. In a statement on Thursday about its confidential I.P.O. filing, Lyft said it
had not yet determined how many shares would be sold or their price range.

Any offering would be “subject to market and other conditions,” Lyft said.

Follow Erin Griffith and Mike Isaac on Twitter: @eringriffith and @MikeIsaac.

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