With the excitement of Snap Inc.’s IPO still fresh in everyone’s minds it is no surprise investors have started looking for the next initial public offering (IPO) opportunity.
For some time investors have discussed a possible IPO announcement from Uber, a large privately held tech company. Unfortunately Uber’s IPO excitement has cooled recently following scandalous news surrounding the company. A former Uber engineer named Susan Fowler has published sexual harassment allegations against the company. And that is only the beginning. The New York Times published an article that looks deeper into systematic issues plaguing Uber’s company culture. At this point much is to be expected if Uber wants to consider a run at an IPO. On a more promising note Uber CEO Travis Kalanick seems to be making a real effort to get the company in order. Kalanick’s next steps in handling the situation will determine Uber’s public sentiment trajectory. He is off to a good start by allowing Arianna Huffington, who holds an important leadership position on Uber’s board, to put the squeeze on Uber management and to redirect the derailed company culture. Investors will not take a chance on a company that has the potential for disreputable news to break, no matter the quarterly profits.
This scandal is rocking more than Uber’s IPO hopes. Instead of a one off incident Uber’s company personality is disgraced. When Uber decided to pick up and move out of Austin, Texas in the Spring of 2016, a wide open and hungry rideshare market opened up. Uber flirted with social disaster recently when its drivers continued to pick up customers while taxi drivers protested Donald Trump’s travel ban. Austin proved smaller rideshare apps are stepping up to Uber vacancies in the market. Lyft is already a sizeable and capable rival. A social movement against Uber could lead to the development of more competitive apps. Any additional consequences that hurt Uber’s publicity could threaten long-term earnings in ways currently unexpected.
If Kalanick makes all of the right decisions and Uber keeps its nose clean its IPO potential can be salvaged. Uber certainly has the capital an IPO would provide in mind (See Snap Inc. IPO). But cash influx aside private tech companies like Uber have more to consider when thinking about going public compared to other companies. Tech companies see themselves as social developers, not just businesses providing goods and services. They pride themselves in changing the world and making it a better place. If a company goes public the bottom line carries more weight and every socially charged decision gets questioned. Decisions like the one Uber made in Austin would be scrutinized. Does having profit hungry shareholders change the way these companies do business? There is also the question of which sector tech companies align themselves with as they grow. Lawmakers and regulators notice tech startups when the profits go from trickle to deluge. Take Uber for instance: tech or transportation company? By opting to remain classified as a tech company Uber has sidestepped regulations that burden their competition. This detail may cease to go unnoticed if an IPO is considered. Uber has a long road ahead and as for the route it takes from here an old adage rings especially true: only time will tell.