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Investing in Uber’s IPO means investing in Uber’s rivals

What is Uber? It’s an amalgamation of a bunch of Ubers of other countries.

A woman wearing a headscarf stepping into the driver’s seat on a car.
A driver for Uber’s former competitor, Careem, in Saudi Arabia.
Sean Gallup/Getty Images

In a startup’s final weeks as a private company, there is a strong incentive to play it safe: no major executive departures, no last-minute strategy shifts, and no billion-dollar acquisitions. Be still, applecart.

Uber isn’t hewing to that conservatism.

The company on Tuesday announced a $3.1 billion deal to buy Careem, Uber’s principal competitor in the Middle East, which is expected to close early next year. The acquisition has leaked out over several months so it’s not a terrific surprise, but that it would announce such a deal so close to the IPO speaks to a way in which possible public market investors should evaluate Uber when they have the chance to buy or short the stock in a few weeks.

To bet on Uber — as is increasingly clear with this Careem purchase — is to bet not on Uber but on a global ride-hailing spoke model in which San Francisco-based Uber Technologies, Inc is merely the hub.

To believe in Uber is to believe in the Uber of the Middle East, Careem, 100 percent of which is now owned by Uber. It is to believe in the Uber of Russia, Yandex, 37 percent of which was owned by Uber. It is to believe in the Uber of Southeast Asia, Grab, 28 percent of which was owned by Uber. And it is to believe in the Uber of China, Didi Chuxing, 20 percent of which was owned by Uber.

Those companies, like Uber, match drivers with riders and take a cut of the booking as revenue.

Not all of these ownership positions reflect Uber’s intentionality or came from a position of strength, for what it’s worth. Its stakes in Yandex, Grab, and Didi came after bleeding billions of dollars in a battle for market share only to sell their overseas operations and retreat back to the United States. Uber has also reportedly had talks to sell its India operation to Ola (you guessed it, the Uber of India).

Uber’s market value — pitched by bankers as high as $120 billion — obviously would not be as high without its valuable stakes in those rival companies. But will those ride-hailing juggernauts fare well as standalone companies when they go public themselves? That’s a question that public market investors will be asking themselves in the next few weeks.

If not, there’s always Lyft — with a limited international footprint, no overseas stakes, and its own IPO later this week.

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