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Uber’s Useless IPO

3 | By Shah Gilani

Because stupidity doesn’t deserve a lot of space to be discussed, I’ll keep this really brief.

Uber is stupid for waiting so long to go public.

Not only will their IPO bomb, if not on the first day (though that’s my bet), then shortly thereafter. But by going public now with their debut and reputation about to be tattered, they’re going to disenfranchise their drivers who will collectively further distance the company from maybe ever making a profit.

Forrest Gump reminded us, “Stupid is as stupid does.”

Here’s the stupid stuff Uber did and the reason why you shouldn’t touch its stock with a ten-foot pole…

Stupid is as Stupid Does

After 10 years in existence and raising about $24 billion in venture capital, private equity, and late-stage investor money, Uber’s going public.

Why now?

Because all those early investors want to book some paper profits, or cash out for good.

They know Uber is losing money, and they know that just like Lyft Inc. (NasdaqGS:LYFT), Uber’s IPO will probably crash and burn.

They saw what early-stage Lyft investor Carl Icahn did with his 2.7% stake in Lyft.

Icahn privately sold his entire stake, $550 million worth, reportedly to George Soros, days before the IPO, at close to the IPO price.

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Uncle Carl’s laughing because Lyft IPO’d at $72, and two weeks later, the stock’s below $53.

Yeah, Uber’s early investors want out.

And the public pool of fools is their preferred dumping ground.

Who wants to own shares in a company that’s a perennial loser of money?

Okay, you’ve heard that Uber lost $3.3 billion in 2018, that’s after it made a one-time gain of $997 million selling an international business, where it was losing money.

The year before, Uber lost $4 billion.

From 2014 through 2018, the five years for which Uber reported financial data as part of its SEC registration, the company lost a cumulative $6.8 billion.

In that same registration filing, Uber warned in the risk factors section that it has “incurred significant losses since inception” and expects its operating expenses to “increase significantly in the foreseeable future.”

“We may not achieve profitability,” they stated. Because they had to.

If you didn’t read the registration statement and you invested in Uber, you’re stupid.

That’s because you probably read some of the fluff about Uber.

The company had 5.2 billion rides last year. Wow!

Gross bookings on those rides amounted to $50 billion. Wow!

Total revenues last year amounted to $11.3 billion. Wow!

Yeah, but wow this – they lost $0.58 per every ride.

Sound like a business that makes sense?

Not really. That’s why they’re spending billions on food delivery, bicycle ridesharing (LOL), and self-driving cars.

A significant expense for Uber is research and development, spent mostly on the company’s efforts to develop self-driving cars through its Advanced Technologies Group. In 2018, the R&D spend was $1.5 billion, or 13% of revenue, up from $1.2 billion in 2017.

Of that $1.5 billion, $457 million was spent on Uber’s autonomous vehicle research, up from $384 million 2017.

Let me put that in some perspective. Not financially, though – fundamentally.

Uber’s business is based on “entrepreneur” drivers working the streets with their own cars. They don’t get minimum wage. They don’t get benefits, and they don’t get stock options or a pension plan. They get to work for themselves.

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And, Uber wants to go “driverless?”

Some drivers are currently on strike. Not all of them, though, because there is no union or collective bargaining – just millions of drivers trying to make a buck for themselves in the U.S. and shekels elsewhere around the world.

They’re going to look at the failed IPO and realize the company they are “contractors” for is poorly managed, a money-losing juggernaut, and doesn’t do squat for them.

So, they’re going to fight for better working conditions, meaning maybe a minimum wage, and for sure benefits.

If Uber loses to its drivers and labor costs rise, the company will never make money.

And you want to buy Uber?

Go ahead.

Stupid is as stupid does.

Sincerely,


Shah

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3 Responses to Uber’s Useless IPO

  1. Mr.. Chicago says:

    You have to be a complete moron if you invest in Uber, I work for them. It’s not a safe buy at all. But good luck to all the idiots that invested with them. It’s just a matter of time when Google or Amazon will buy the company.

  2. Kevin Beck says:

    Don’t worry; they’ll make it up in volume.

    Yes, I said that as a joke, because I was quoting from a former division manager who worked for me. Until he uttered that line in a meeting with a potential customer.

    Another factor that I don’t think many of their worker bees (drivers) are considering is the wear and tear on their own vehicles. The amount they are being paid by Uber is barely covering their cash expenses, and they still have to maintain their vehicles at their own expense. The nation is already in a position where very few people can come up with $300 to cover an emergency expense; what happens when these Uber worker bees need to pay for a brake job on their vehicle that they are using for all these urban routes, where they use the brakes more often than normal?

    Another thing I wonder is: How many of these worker bees are letting their auto insurance provider know about them driving around other people for compensation? Also, are they getting the proper drivers’ license for their state? Most states require a commercial license if you haul others around in your car. Each of these costs more than just a normal operators’ license.

    Under current conditions, I don’t consider Uber or Lyft to be investable.

    One more thing. If Uber is worth $90 billion today, is there any room for growth in that value? Or are you paying to bail out those who got in early? Or will they ever turn an annual profit?

  3. Rocco says:

    I was driving for Lyft for 2.75 years full time. I had to go back to work full time with a 40 hour week to try and get back the money I lost. 90 % of what they tell the public and their drivers are lies and over exaggerated claims about how much a driver could make…well yeah if you give 100 rides per week and at 2 in the morning when all the drunk or high on drugs jerks are out. Lyft and uber should be investigated by every possible govt agency,!

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