May 5, 2019 - Economy

Public markets take center stage with all eyes on Uber IPO

The Wall Street bull being illuminated by a spotlight

Illustration: Lazaro Gamio/Axios

Uber. WeWork. SoftBank. Even Tesla. After a decade in which private markets have overwhelmingly funded the most innovative and dynamic companies in the world, public markets are having their day, and showing what they're capable of.

Driving the news: Uber will go public this week in the most feverishly anticipated IPO since Facebook. (Let's hope it goes better than that fiasco.) It's probably going to end up raising somewhere in the region of $9 billion. To put that in context: The company has raised about $20 billion to date and is currently sitting on about $6.4 billion in cash. So while the public markets are providing a lot of capital, they're still providing less than private investors have done over the years.

  • WeWork burned through more cash than Uber did last year; it too is going public, in an attempt to keep finding fuel for its cash fire. The news was music to bondholders' ears: The benchmark 2025 bond, which had a yield of more than 11% in January, now trades above par and yields just 8%. Debt investors believe, it seems, that a large cushion of public equity might be able to protect them should WeWork run into financial trouble.
  • Tesla is raising money in the stock market too — as much as $2.7 billion in total, between fresh equity and an equity-linked bond. The move is a retreat for CEO Elon Musk, who had previously been adamant that he would raise no fresh equity and who was cutting costs aggressively in an attempt to avoid such dilution. Shareholders don't share his aversion to fresh capital raises: Tesla's stock price rose on the news.
  • Even SoftBank is reportedly considering an IPO of its $100 billion Vision Fund. The move would be legally dubious, at least in the U.S., but I'm sure that if he's serious, CEO Masayoshi Son will be able to find a stock market happy to accept the listing — and that there would be no shortage of investors willing to buy shares in the fund, at the right price.

The big picture: Buybacks have already reached $272 billion this year and are on track to exceed $1 trillion for the second year running. That's a lot of cash going into investors' pockets, and most of it is going to get reinvested in the market somehow. It stands to reason that liquidity-constrained companies would want to access that source of funds, possibly on a repeated basis. If Tesla can do secondary offerings, there's no reason why Uber or WeWork shouldn't be able to do so as well.

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