Uber’s late IPO should be a warning for other unicorns

It’s easier to make changes when a company is smaller and more nimble, but Uber waited too long and got too big to go publicScreens at the New York Stock Exchange during Uber’s IPO in New York. Picture: REUTERS/ANDREW KELLYCompanies have more access to private capital than ever before, and many are putting off the scrutiny of public markets for as long as possible. There are 349 unicorns, or private companies valued at $1bn or more, around the world, according to research firm CB Insights.

In December 2014, questions arose about Uber’s process for screening drivers after a passenger in India accused one of rape. In June 2015, taxi drivers and their supporters protested across France, blocking roads and attacking suspected Uber drivers — a preview of protests that erupted later in other countries. That same month, the California Labour Commission ruled that Uber drivers were employees, not independent contractors, challenging the company’s business model.

That same month, Waymo, the self-driving car company, contended that Uber stole its trade secrets. And in November 2017, Bloomberg News reported that Uber paid hackers $100,000 to cover up a data breach affecting 57-million customers and drivers a year earlier. Uber no doubt believes the market is being too hard on it, but the numbers suggest otherwise. Its price-to-sales ratio is 4.9, based on analysts’ revenue forecast for 2019. That’s 15% higher than the S&P 500 IT index, the richest sector by that measure, 138% more expensive than the S&P 500 Index, which is no bargain; and 252% higher than the S&P 500 transportation index. In other words, Uber’s stock could get a lot cheaper.

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