NEW YORK — Can a company that didn't exist five years ago, an upstart with a knack for angering regulators who could close it down, really be worth $40 billion?
That is the figure that had investors from Wall Street to Silicon Valley abuzz a day after Uber announced it had received more money from venture capitalists than any private company this year. The investment places a value on the car-service company that is higher than American Airlines or Kraft Foods — a stunning vote of confidence.
Or maybe it's just too optimistic.
"It gives me a nosebleed," says Sam Hamadeh, CEO of PrivCo, a research firm. "You're being asked to buy on pure speculation."
The cash infusion from investors — $1.2 billion for a small stake — comes at a time when values for private companies backed by venture capitalists are rising fast. New investments in Dropbox, a file-sharing service, and Airbnb, a website for people renting out their homes, have sent their valuations soaring.
But, at $40 billion, the prize may go to Uber. That is more than double what investors valued the company at just six months ago.
With an easy-to-use app, the company promises to tap a big market that links drivers and customers who need rides. But it also faces regulatory hurdles, competition and questions about how it will make money.
A breakdown of the pros and cons of an investment in Uber: