Last September, Uber's top executives were pitched by some of Wall Street's biggest banks, Morgan Stanley and Goldman Sachs.

The bankers' presentations calculated Uber's valuation almost identically, hovering around one particular number: US$120 billion ($183.9b).

That was the figure the bankers said they could convince investors Uber was worth when it listed its shares on the stock market, according to three people with knowledge of the talks.

Uber's chief executive, Dara Khosrowshahi, and chief financial officer, Nelson Chai, listened and discussed the presentations, these people said. Then they hired Morgan Stanley as lead underwriter, along with Goldman Sachs and others, to take the company public — and to effectively make the US$120b valuation a reality.

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Nine months later, Uber is worth about half that figure. The ride-hailing firm went public last week at US$45 a share and has since dropped to around US$43, pegging Uber's market capitalisation at US$72b — and officially crowning it as the stock market debut that lost more in dollar terms than any other American initial public offering since 1975.

How Uber's offering turned into what some are now openly calling a "train wreck" began with the US$120b number that the bankers floated. The figure leaked last year, whipping up a frenzy over how Uber could soon become the biggest American company to list on an American stock exchange — larger even than Facebook, which went public in 2012 at a whopping US$104b valuation.

But for Khosrowshahi and Chai, the US$120b number turned Uber's IPO process into an exercise in managing expectations. Some large investors who already owned Uber shares at cheaper prices pushed back against buying more of the stock at such a lofty number, said people familiar with the matter.

Their appetite for Uber was dampened further by the company's deep losses and slowing growth in regions like Latin America. And Uber had to contend with unforeseen factors, including fraying trade talks with China that spooked the stock market in the same week that the company decided to go public.

The result has created a host of pointed questions for all involved in Uber's IPO, from Khosrowshahi and Chai to the lead underwriters at Morgan Stanley, Goldman Sachs and Bank of America. While Uber raised US$8.1b from its offering and reaped billions of dollars in returns for its early investors and founders, what should have been a climactic moment for a transportation colossus instead became an embarrassment.

Khosrowshahi arrives at the New York Stock Exchange as his company makes its IPO. Photo / AP
Khosrowshahi arrives at the New York Stock Exchange as his company makes its IPO. Photo / AP

The extent of the fallout may not be clear for a while, and it is too early to judge how Uber will ultimately fare in the public markets. But as many other tech-related companies aim to go public this year, including the food-delivery company Postmates and the real estate firm WeWork, they will have to contend with whether Uber has squelched what had been a red-hot IPO market.

"The US$69b market cap Uber had when the market closed today is a new reality," said Shawn Carolan, partner at Menlo Ventures, which invested early in the company. But he added that Uber's executives now had "the opportunity to show us what they can do."

This account of Uber's IPO was based on interviews with a dozen people involved in or briefed on the process. Many asked to remain anonymous because they were not authorised to speak publicly. Representatives from Uber, Morgan Stanley and Goldman Sachs declined to comment.

For years, Uber was an investor darling. As a privately held company, it gorged on capital from venture capital firms like Benchmark and GV, mutual fund firms like Fidelity Investments, and companies like SoftBank. Its private valuation shot up from US$60 million in 2011 to US$76b by August 2018.

Khosrowshahi, who became CEO in late 2017, was recruited partly to steer Uber through a successful IPO. Uber's board agreed to pay him US$45m in cash and restricted stock — and set an unusually specific valuation target for an additional bonus. In a provision in Khosrowshahi's compensation agreement, which was revealed in the company's IPO prospectus, the board said that if Uber was valued in the public market at US$120b or more for at least three months in the next five years, he would receive a payout of US$80m to US$100m.

That provision set something of a goal for Uber, which the investment bankers who were hired to take the company public also gravitated toward. Within weeks of the banks' presentations on the US$120b, that number leaked, leading to giddy speculation in Silicon Valley and on Wall Street that Uber's offering could usher in a golden era of wealth.

By December, Uber's IPO team was set. At the company, Chai, a former CFO at Merrill Lynch, was charged with leading the public offering. At Morgan Stanley, Michael Grimes, the firm's star tech banker, was the point person, assisted by Kate Claassen, head of internet banking. Goldman Sachs' team was led by Gregg Lemkau, Kim Posnett and David Ludwig. Bank of America's was headed by Neil Kell and Ric Spencer.

Almost immediately, the setbacks began, starting with Uber's business. Its once-meteoric growth rate was slowing as its geographic expansion appeared to be running out of room and as competitors continued springing up across the world.

One growth headache was connected to Uber's biggest investor, SoftBank. The Japanese company, which has a US$100b Vision Fund that it uses to invest in all manner of companies, has poured capital into technology startups including Didi Chuxing, China's biggest ride-hailing company, and 99, a transportation startup in Latin America.

For years, Uber was an investor darling. Photo / AP
For years, Uber was an investor darling. Photo / AP

In January 2018, Didi agreed to acquire 99. Both SoftBank and Didi also started directing funds toward pushing deeper into Latin America; SoftBank eventually created a US$5b fund earmarked specifically for investing in Latin American companies.

For Uber, the timing was terrible. The region was one of its most promising growth areas and its competition had ramped up. By this February, the damage in Latin America had begun showing up in Uber's results in the form of slowing growth.

Uber's food delivery business, UberEats, was under attack as well. SoftBank had sunk hundreds of millions of dollars into DoorDash, a food delivery company in the United States. More recently, SoftBank invested US$1b into Rappi, a food delivery company in Latin America. Uber had to spend more to battle those rivals.

SoftBank and Didi declined to comment. (Uber and Didi own shares in each other as well.)

Lukewarm demand

The slowing growth led to lukewarm investor demand for Uber's shares, according to two of the people involved in the matter. Some investors argued that Uber needed to price its offering lower, these people said.

Some investors were also resisting because they had earlier invested in Uber at cheaper prices. Since its founding in 2009, Uber has taken in more than US$10b from mutual fund firms, private equity investors and others, meaning that its stock was already widely held among those institutions that traditionally buy shares in an IPO. So the IPO essentially became an exercise in getting existing investors to buy more shares — a tough sell, especially at a higher price.

In March, another problem cropped up. Uber's rival in North America, Lyft, went public and promptly fell below its offering price on its second day of trading. Investors appeared skeptical about whether Lyft could make money, setting a troublesome precedent for Uber.

By the time Uber made its IPO prospectus available in April, it had already told some existing investors that its offering could value it at up to US$100b — down from the initial US$120b.

Inside Uber, two people familiar with the deliberations said the company's board was also not fully briefed on how Khosrowshahi and other executives planned to pitch the firm to investors in what is known as a "roadshow." Only a smaller group of board members, who were part of a pricing committee — including Khosrowshahi; Ronald Sugar, who is also Uber's chairman; and David Trujillo of TPG — focused on the IPO, these people said.

Another person close to the board said that all board members were invited to attend pricing discussions and IPO event planning, and that all materials from the pricing committee were made available. Some members were more active than others, the person said.

Khosrowshahi takes a photograph as he attends the opening bell ceremony at the New York Stock Exchange. Photo / AP
Khosrowshahi takes a photograph as he attends the opening bell ceremony at the New York Stock Exchange. Photo / AP

In late April, Uber proposed a price range of US$44 to US$50 a share for its offering, putting its valuation at US$80b to US$91b, below the US$100b it had floated just a few weeks earlier.

The company soon hit other obstacles. President Donald Trump tweeted this month that he wanted to raise tariffs on US$200b of Chinese goods, unsettling global stock markets. The day before Uber priced its IPO, Lyft reported a US$1.14b loss for its first quarter, renewing questions about the health of ride-hailing businesses.

Uber's executives, board and bankers discussed the final pricing of the stock sale on May 9. Several board members pushed for a price at the higher end of the US$44- to US$50-a-share range, said the people briefed on the situation.

But Morgan Stanley, Goldman Sachs and others agreed that it needed to be lower, they said. The list of orders from potential investors, known in Wall Street jargon as the "book," showed that the most desirable investors — the big asset managers who were most likely to hold on to the shares, even in tough times — were interested only in the lower price.

The final price: US$45 a share.

That evening, Khosrowshahi and his management team gathered in New York at Daniel, a Michelin star restaurant a few blocks east of Central Park, at a "pricing dinner" hosted by Morgan Stanley. The mood was upbeat, according to two people familiar with the evening.

But the next morning, that mood had changed. Uber executives arrived at the New York Stock Exchange, where the company was listing its shares. Before the first trade, monitors that lined the exchange floor displayed how Uber's stock was likely to fall — flashing up US$45, US$44, before finally opening at US$42. The chatter quieted.

The rest of the day was little better. Uber's stock never rose close to its US$45 offering price. As the so-called stabilisation agent, charged with helping trading in Uber stock, Morgan Stanley made some moves to support the shares, according to people with knowledge of the matter. But by the end of the day, while the S&P 500 closed up, Uber's stock remained down.