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Elon Musk is buying Twitter, so will Uber be the next big tech play to be taken private?

Perhaps you don’t need the ego of planetary proportions of Musk’s to bid for Uber, just a calculated eye for a bargain. Elon Musk is probably way too busy, so maybe it’ll be a job for another enigmatic billionaire. But, what are the chances Uber Technologies Inc (NYSE:UBER) follows Twitter to become the next surprise mega-money takeover? A glance at the stock price suggests Uber has lost its way, and a discount price tag may leave it vulnerable to a cut-price offer. Quite intriguingly, its movement on the market over the last year mirrored that of Twitter. Both tech stocks were down roughly 50% over the last 12 months (at least up until Elon Musk’s US$43bn bid for the social network). The question now is whether a buyer might similarly seek a quick takeout while Uber is down on its luck. Both companies have similar backstories including big stock market slumps, and legal and regulatory challenges – not to mention the disruptive impact they’ve on their respective industries. What’s the state of play? Uber is set to report its first-quarter earnings next Wednesday. News that UK-based Addison Lee returned to profitability as Covid restriction perhaps bodes well for Uber. UBS believes as much, with the Swiss Bank this week saying that rideshare services like Uber will benefit “from increased mobility as the pandemic fades, travel activity ramps and more workers return to the office.” Nevertheless, news from the food delivery service will likely be less upbeat, UBS said, as it set the scene for a “solid first quarter” rather than a spectacular one. Is it Uber, or do we just not like tech stocks anymore? Uber is among the Silicon Valley stocks to have cooled significantly over recent months. The tech sector has endured a tough start to 2022 and the benchmark Nasdaq 100 index, which closed at its lowest point in nearly a month this week, has now dropped more than 20% in the year to date. According to Richard Jeans, Proactive’s tech analyst, the new disruptors enjoyed “an amazing run during the pandemic” but now face much stronger comparatives in 2022. At the same time, higher inflation and interest rates along with fiscal tapering have blown the froth off tech stocks, while the war in Ukraine has rattled investor sentiment. Is Uber primed for a buyout? Uber is still in a strong position in terms of its ride business, with data from Statista highlighting it still has a 76% market share in the UK and a 69% market share in the US. Meanwhile, for food delivery, it has a 27% market share in the UK, just behind JustEat, while it has a 26% share in the US, although that is half of DoorDash. According to Susannah Streeter, senior analyst at Hargreaves Lansdown, there is bound to be speculation that Uber’s future with an estimated US$2 trillion of private equity dry powder ready to be deployed. Even with those sorts of sums unallocated, Uber, at US$60bn, isn’t exactly a bite-sized snack of a deal – and it’s 40% more than Musk is paying for Twitter. So, any “would-be suitor would have to have even deeper pockets than the Tesla chief executive”, Streeter highlighted. Still, the opportunity is there with the company still reeling from the impact of the pandemic and as well as dealing with legal and regulatory issues. In the last year, for example, it has been fighting rear-guard actions in the US, UK, France, Germany and Vietnam. Undervalued Wall Street’s major investment houses think there is value there that the market has overlooked. Of the 48 analysts covering the stock, only one expects Uber’s shares to underperform in the next year. With four sitting on the fence, the remaining 43 American analysts think the business is cheap. Let’s see if anyone steps up.