Uber Surpasses Delta Air Lines, Inc. (DAL) and Tesla Motors Inc. (TSLA) on Market Cap Valuation

Ride-sharing service Uber Technologies is now the most valuable startup in the world after a $1.2 billion private investment took its valuation to $41 billion surpassing the market cap for Delta Air Lines, Inc. (NYSE:DAL) and Tesla Motors Inc. (NASDAQ:TSLA). Bloomberg’s Editor, Paul Kedrosky argues it is still in early stages to speculate on the startup valuation which is still privately owned.

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At the $40 billion valuation, Uber is purportedly valuable than Tesla at $28.3 billion, Delta Air Lines, Inc. (NYSE:DAL) at $39.5 billion and American airlines at $36.7 billion. Most of the financing that was raised in the private placement will be converted into shares when the startup goes public.

“This is clearly a pre-IPO financing round and it is a bet on the part of some large institution investors that they can get at these at a higher price than they currently invested. This is now at the point where you go to this pre-IPO financing round when you are more or less detached from any sort of orthodox valuation and it is really a bet on what the public market will pay,” said Mr. Kedrosky.

Uber is growing remarkably fast than the likes of Delta Air Lines, Inc. (NYSE:DAL) with an excess of $2 billion in revenue with the potential of growing its global addressable market for taxi services. The new round of financing will aid in the expansion of workforce, lure more drivers, as well as test delivery service in more than 250 cities around the world.

Kedrosky believes the total addressable market that Uber plans to tap into, going forward is what is making the startup be valued highly even though it is poised to face stiff competition from other taxi companies.  The number of black cars continues to increase on the road a sign that Uber might finally be gaining share in the tax business.

There are also concerns in Silicon Valley that Uber’s aggressive growth might one day come back to bite in terms of high prices for services.

“It is not just you win we lose; it is we win you die, and that’s the way Microsoft approached the competition for years. Uber is very much curved out of that same mold that it is not enough for them to win. They have to dominate the market, so I think it is a legitimate concern,” said Mr. Kedrosky

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