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.”
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.
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.
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.
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?
Stupid is as stupid does.
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