Hubert Horan: Can Uber Ever Deliver? Part Seventeen: Uber’s 2018 Results Still Show Huge Losses and Slowing Growth as IPO Approaches

By Hubert Horan, who has 40 years of experience in the management and regulation of transportation companies (primarily airlines). Horan has no financial links with any urban car service industry competitors, investors or regulators, or any firms that work on behalf of industry participants

Overview of Uber 2018 results

Uber released a brief summary of its fourth quarter and full-year 2018 P&L results on Friday.

Excluding claimed benefits from the first quarter sale of its failed Southeast Asia operations to Grab, Uber had a 2018 GAAP loss of $3.3 billion. [1] 2018 losses would have been $3.7 billion but were reduced by an unexplained $400 million reduction in fourth quarter tax liability.

Although Uber had provided reporters with detailed 2017 financial data, in recent quarters it only released five P&L numbers making it impossible to explain changes in reported totals. This is the first time year-over year total Uber GAAP losses have actually declined. Uber lost $2.5 billion in 2015, and $4.5 billion in 2017.

Uber has obvious interest in reducing losses prior to its IPO but there is no way to tell whether the improvements in 2018 were due to improved ridesharing efficiencies or the elimination of very unprofitable markets, or reduced spending on future markets and growth.

Uber’s fourth quarter GAAP loss was slightly lower than both its third quarter loss and its 2017 fourth quarter loss, but would have been worse without the income tax liability change. Uber remains hugely cash flow negative, and cash from operations worsened to ($645m) in the fourth quarter versus ($487m) in the third quarter. However Uber’s total cash on hand increased to $6.4 billion (from $5.9 billion at the end of 2017) thanks to new investment and borrowing.

Given nine years of abysmal profitability, Uber’s public statements have emphasized revenue growth, but that growth has continued to slow down. Fourth quarter net revenue was $3.0 billion, a year-over year gain of 24%, but the first quarter’s year-over-year gain had been 70% and the quarter-to-quarter gain was only 2%. Comparisons are complicated by the growth of Uber Eats, which appears to be growing much faster than Uber’s core taxi business. Uber has been aggressively trying to capture food delivery  share from Grubhub and other incumbents. But Uber didn’t provide any data that would allow one to identify the separate impacts of taxi service, food delivery or scooter rentals other businesses on their total results.

Press Coverage Increasingly Negative

All of the major business and tech industry publications that follow Uber immediately reported the P&L results including:

https://www.bloomberg.com/news/articles/2019-02-15/uber-results-show-revenue-growth-slows-amid-persistent-losses

https://www.nytimes.com/2019/02/15/technology/uber-stock.html

https://www.wsj.com/articles/uber-sales-growth-slows-further-as-ipo-nears-11550253602?mod=searchresults&page=1&pos=1

https://www.ft.com/content/aa76c512-30eb-11e9-8744-e7016697f225

https://techcrunch.com/2019/02/15/uber-reports-3b-in-q4-revenue-rising-operating-losses/

While these reports appropriately focused on the data Uber released, it is worth noting that coverage was much more critical than the reporting that would have been seen a year or two ago.

The Wall Street Journal highlighted the revenue growth slowdowm; its lede was “As it steers toward a planned initial public offering later this year, Uber Technologies Inc. is hitting a bumpy patch on sales.”The Financial Times’ lede was “Uber’s revenue growth slowed and costs rose in the final three months of 2018, as the ride-hailing company spent money on price wars around the world.”

The headline in the Times was “As Uber Prepares for I.P.O., Its Losses Pile Up.” It speculated that Uber had been unable to take a higher share of ridesharing revenue due to growing competitive pressures and that lower Uber Eats margins had also hurt results. It also reminded readers that the post-IPO stock price of companies like Snap who went public while still making sizeable losses had collapsed badly when those losses persisted.

Both Bloomberg and Techcrunch highlighted the unexplained income tax liability adjustment and wondered how potential IPO investors would react to the results. Bloomberg suggested that “News that the company is still burning through more than $1 billion annually may give some investors pause” and might be unhappy with Dara Khosrowshahi’s approach since he was hired 17 months ago. “At the time, investors expected Khosrowshahi would focus on stemming losses. Instead, he has prioritized fending off rivals like Lyft and investing in areas of growth like food delivery.”

Everything Is Still Riding on the Upcoming IPO

As previously discussed in this series, this year’s IPO will be the most important event in Uber’s history. Roughly two-thirds of the cash Uber has raised came from investors who bought shares after 2015, at prices closely linked to its current $70 billion valuation. These investors were not established Silicon Valley venture capitalists (who had provided Uber’s original funding at much lower prices), but investors willing to pay much higher prices once Uber had become a hot, glamorous company and the biggest unicorn of all time.

The 2017 Board rebellion, that led to the sacking of Travis Kalanick and the hiring of Khosrowshahi, was not due to the sexual harassment issues Susan Fowler had raised, but because Kalanick knew that Uber was not ready to withstand serious capital market scrutiny and refused to initiate an IPO. Khosrowshahi was hired after promising the Board he would complete that IPO during the second half of 2019. The Board set bonuses for him that made it clear they wanted to achieve an IPO valuation north of $100 billion, which would provide those later investors to achieve the huge returns they had been promised. An IPO valuation of merely $70 billion would mean these later investors would have been better off stuffing their cash into their mattresses. Morgan Stanley and Goldman Sachs, the two firms competing to run Uber’s IPO process, both claimed that Uber could go public at $120 billion (Morgan Stanley was selected).

Uber accelerated the process when Lyft began its own IPO process in December, which it hoped would be finalized in March or April. Lyft’s ridesharing business model is identical to Uber’s and is pursuing a much more modest valuation (currently $15 billion).

Uber realized it would lose control of the public narrative. Investors might conclude that a ridesharing business might be worth $20 billion (but not much more) or might review the financial data in Lyft’s prospectus and realize it was worth even less than that.  Uber and Lyft both recognized that the overall tech equity bubble might be bursting in light of growing awareness that long-term growth and profit expectations at companies like Facebook, Twitter and Amazon may not have been firmly grounded in reality. Uber and Lyft will also be competing with companies like Palantir, Airbnb, Slack and Postmates for investors attracted to prominent tech unicorns.

Companies who want to go public make an initial confidential filing with the Securities and Exchange Commission. Filings must include detailed, audited financial results (which neither Uber nor Lyft has ever released), pro-forma forecasts of future results, and a written discussion of business risks and why the company could achieve the profitable growth it has forecast. The SEC has 30 days to review initial filings, but can ask questions and demand changes before final approval. This schedule was delayed by both the government shutdown, and the need to update filings with the latest (full year 2018) financial data. Once approved, companies can release the prospectus (known as the S-1 filing), and conduct a public roadshow to convince investors to buy the stock, and gauge what price the markets will accept.

If Uber is satisfied it can achieve the $100+ billion valuation they need, they can announce the final price and pull the trigger on the actual stock sale. That would require convincing investors that the stock has significant appreciation potential above the IPO price. This means they need to demonstrate that Uber can quickly achieve breakeven in its core car service business, can steadily increase taxi revenues and profits for many years, and can also quickly achieve rapidly growing profits in a variety of other businesses (e.g. food delivery, scooters, driverless cars).  The simple counter-example is Amazon’s IPO, where they had already demonstrated the ability to produce strong positive cash flow from their core bookselling business, demonstrated that their sophisticated ecommerce platform and warehousing/distribution infrastructure gave them powerful competitive advantages, and that their existing investment could easily be leveraged into profitable growth into a wide range of other retailing markets.

As readers of this series will understand there is no objective, verifiable evidence at hand that any claims about rapid Uber profit growth in ridesharing or any other business are likely to be true. Additionally, Uber faces a Catch-22 type dilemma. There are spending cuts Uber could make to goose the short-term P&L numbers, but these would show Uber was not investing in the profitable long-term growth it was promising. Likewise, increased investment in speculative future new businesses would make the (already awful) short-term P&L and cash flow numbers even worse.

Uber’s accelerated IPO schedule means it has had less time to clean up its results and forecasts, and develop a more convincing explanation as to how it will suddenly become “the Amazon of Transportation.”

Today’s P&L announcement sheds no light on how they might approach the IPO. It is unclear why Uber released such limited financial data when the public release of much more detailed, audited data is imminent. IPO investors will need clear information about revenue and spending broken down by each current and prospective future line of business. They will need to be able to track trends for key items such as rideshare prices, driver compensation and incentives, marketing and IT expenditures. They will need to see whether actual spending and margin changes are aligned with management’s explanation of how it can achieve strong profit growth in the future.

Over its ten year history, Uber has built a reputation as a highly successful and valuable company based on manufactured narratives, and propaganda techniques that hid (or diverted attention from) evidence about its lack of competitive economics and its terrible financial results. Over the past two years, this series has attempted to explain why Uber (as Travis Kalanick had predicted) was unlikely to survive capital market scrutiny once detailed financial evidence became widely available.

Perhaps Uber’s proven ability to manufacture narratives will convince investors to put up $100 billion in real money for the company’s shares. Perhaps Uber can get away with an IPO prospectus that doesn’t answer any of these critical questions about the company’s economics. If Uber raises the money they are hoping for, the Uber “problem” simply shifts from the current investors to the new public shareholders.

If Uber gets significant pushback from investors who don’t find its prospectus narratives convincing, things would become very messy very quickly. Cutting the valuation much below $100 billion, or significantly delaying the IPO could restart the Board battles that crippled the company in 2017.  Major pushback from investors could completely burst the longstanding perception that Uber is a powerfully innovative company that has huge long-term profit potential. If the public begins to realize that none of those narrative-driven perceptions were true, Uber has no “Plan B” to fall back upon.

______

[1] The $3 billion first quarter profit gain was based on Uber’s assertion as to what the Grab shares it obtained (in exchange for quitting the market) would be worth someday. See Uber’s Q1 Results – Reporters Show They Aren’t Up to Reading Financials, Naked Capitalism, 24 May 2018

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50 comments

  1. Larry

    Excellent analysis as always. I suspect that keeping the autonomous driving unit going is critical to the growth narrative. A low margin driver ride connection app with no barriers to entry does not suggest limitless growth opportunities.

    Reply
    1. Michael

      Given the deep pockets and the type of the investors in ride sharing, ie the Saudis, I think that ridesharing and autonomous vehicles are inextricably interconnected.

      My hypothesis is as follows:

      Given one dream of autonomous vehicles is to make individual transport more efficient and less annoying, the net result would be to make commuting via autos more appealing and put more autos on the highway, thus reducing the clamor for mass transit and stifle any meaningful suburban sprawl restructuring. This will appeal to the fossil fuel producers and the privatized transport manufacturers.

      Secondly, if autonomous vehicles eventually do catch on, and autos become too expensive for local private ownership, the Ubers and Lytes of the world will have a transportation monopoly that can control prices of transportation.

      Therefore, certain deep pocket investors, such as the fossil fuel industry and auto manufacturers are taking the long view and will stay in the business as long as necessary.

      Reply
      1. Michael

        The added bonus, at least from Ford’s statements is the ability to data mine all their riders. Alexa takes it to a whole new level. So much for in car privacy.

        Reply
        1. Brooklin Bridge

          Monopoly of transportation and forced data rights are key. Good points. This would amount to incredible power both in financial terms and raw control of population movement and data. It’s apparently amazing what people will do for convenience. Within a generation the vast majority of them wouldn’t even dream, never mind think, of private vehicle ownership by individuals. All this, of course, assuming there still ARE people. Technology is getting rather Kafkaesque in its goals and aims and one has to wonder how long this pathology can sustain itself.

          Still, in the more immediate, will there be enough investors with such vested interests or such deep pockets to carry the day for a successful cool 100 billion?.

          Reply
      2. Phil in KC

        If autos become too expensive for local private ownership, then why wouldn’t they also be too expensive for Uber? Someone has to own autonomous cars, don’t they? Where would Uber get enough dough to buy all those self-driving cars?

        Reply
        1. Yves Smith Post author

          Yes, and this also would also make Uber’s crappy economics even worse. Suddenly it has to have a ginormous fleet of autonomous cars (huge capital expense or huge lease payments). Uber has been able to get drivers who don’t understand their economics to effectively lease their cars to Uber at below cost. That would end if fully autonomous cars ever become a reality.

          Reply
  2. tegnost

    wow 15 billion for lyft v 100 billion for uber? That’s a big discrepancy. I wondered while reading this what the impact of the inevitable recession might be, how many of those uber fares are short rides that a person in a pinch will downscale to walking or take the bus in order to save some money at the same time drivers are getting squeezed and dropping from the driver force due to not being able to buy gas, paying insurance of course is something that will go wanting when there are 5 bills but only enough money to pay for 3 of them. In some ways the longer uber waits to ipo the more info comes out and the less it’s worth, maybe they should have done it when everyone’s head was in the clouds, but I will defer to the esteemed hubert horan that the exposed numbers would’ve scared even the dreamers away…As a side note, from the early entries in this series I felt that lyft had a better biz model, and they teamed up with fleet providers (gm I think) so had a realistic infrastructure plan while uber goes the kirby vacuum cleaner route and has an high turnover army of direct sellers using their own decaying infra.

    Reply
    1. /lasse

      Taxi are a low threshold “enterprise”, the higher “normal” unemployment the more people try their “luck” as drivers. NYC taxi-regulation come about during the depression in the 30s, drivers where literally fighting over customers on the streets. When Sweden deregulated taxi in the early 90s the same occurred, an over saturated taxi-biz where drivers was fist-fighting at airports over who “owned” the potential passenger.

      Big biz “Sharing economy” wont survive without neo-liberal unemployment and high inequality, a precariat. Uber and so on are just the lowest form of scavengers in the neo-liberal economic model.

      Reply
      1. Robert McGregor

        Uber and Lyft sit in a “sweet spot” which intersects precarity and the peculiar American fetish for cars. Many don’t have money for decent food, lodging, health care, savings, but goddamned they do have a decent car! So without a decent job, but with expenses–including for the decent car–they turn to driving for Uber despite the shitty economics.

        Reply
          1. Polar Donkey

            I see ubereats drivers with their kids in car. Ii also see a disproportionate amount of late model chevy malibus or nissan altimas. Not sure of some sort of deal drivers may be getting from these automakers.

            Reply
            1. Robert McGregor

              I had a Lyft driver last week who described the “rental arrangement” he has with Lyft:

              1) It is through Hertz (?), and on a weekly basis
              2) He paid $259 fee to start the rental
              3) If he does 10 rides a week, then he can keep the car for the week
              4) Lyft takes 1/2 of his fares

              I cannot vouch for the accuracy of this driver’s description. I thought Uber and Lyft were taking about 1/2 of the fares even without providing a rental. He might have neglected to tell me there is also a minimum number of rides you have to do per month. Otherwise it seems like too good a deal–do 10 rides in one day, and then keep the car for the other 6 . . .

              Reply
  3. Louis Fyne

    Uber absolutely cannot stay solvent without at a minimum raising its fares by 2.5X and getting rid of UberPool (its shared quasi-bus-like service).

    Given Uber’s new variable-commission structure for its drivers, for many rides less than 50% of the fare goes to drivers versus previously when slightly under 80% and only slightly over 20% went to Uber HQ.

    Uber can’t achieve sustainable positive cash flow by squeezing its providers (the drivers). (Who does Uber think it is a health insurance company?)

    It’s obvious why Uber won’t raise fares, demand’s elastic and people would go back to public transit, private cars, walking, etc. And Uber’s narrative of “this time is different” will collapse like a Jenga house of sticks.

    And even if this morning a magic fairy delivered a fleet of autonomous cars to Uber, Uber’s cost structure won’t drastically change. Someone has to pay for the dead-head miles.

    And to fuel, clean (**big externalized cost not paid by HQ**), service those cars. And pay the car note. And pay for programming updates. And pay for tires. etc, etc., etc.

    No such thing as a free lunch. You eventually run out of other people’s money.

    Reply
    1. Summer

      “Uber absolutely cannot stay solvent without at a minimum raising its fares by 2.5X and getting rid of UberPool (its shared quasi-bus-like service).”

      They just have to hang around until all those other options for transportation dry up due to lack of funding or pricing out people.
      Then the rate hike would be higher than that 2.5X.

      Reply
  4. Robert McGregor

    Interesting that Uber Eats is growing much faster than Uber Rides. I frequent three independent restaurants in Atlanta–one Indian, one Thai, and one higher-end “Pub.” In recent weeks I’ve noticed early in evening, all three have more Uber Eats customers than regular sit-down customers. I was at the Indian restaurant Wednesday night at 5:30pm (the “Tyler Cowen recommended dining time”), and I was the only customer in the restaurant, but there were four “Uber Eats bags” waiting to be picked up, and I watched the four drivers come in one after another. It’s peculiar to me, because my experiences with Uber Eats for myself have been very underwhelming. The food in no way tastes the same as the dine-in. Not only is it less fresh, but restaurants seem to have a lower-quality “Uber eats meal.” But maybe more and more people prefer to eat their restaurant food at home, so they can watch Netflix. I don’t know.

    Reply
    1. Polar Donkey

      I went to a popular local Mexican restaurant last friday. Getting food to go. Called in my order. Got there there 20 minutes later. They were busy, so I had to wait another 10 minutes. 8 uber drivers were lined up in addition to the 2 who were in front of me. 715 on friday night in Memphis.
      Check out firehouse subs next time you go in. They have a special shelf for the ubereats orders. When order comes in, firehouse makes it, staples receipt to bag, and sets on shelf. Driver just comes in and grabs their order. Never speak with cashier.

      Reply
  5. /lasse

    Uber is ridiculously overvalued, UberRides are not in any sense “high tech”, anyone can have a online booking-system. Any taxi central can have it. Uber are just an scavenger attack on those places where taxi-drivers managed to get almost descent conditions, they scrap up the most desperate from the bottom to break those who climed up a tiny bit.

    Reply
    1. Sacred Ground

      Taxi companies already have it. In my city, there are two apps one can use, Curb and Kab-it. They function like the rideshare apps on that one can summon a cab, call the driver, and pay through the app, except one gets an actual taxi and the fare is set as usual through the meter. Unlike a rideshare, one gets a regulated company, inspected and insured car, and a professional full time driver with a taxi license, clean criminal and DMV records, and drug tested.

      Reply
    1. Brooklin Bridge

      A better pronunciation of the phrase might be, “DuckDuckGo ‘naked Capitalism Horan Uber'”

      duckduckgo may still be limited compared to, “beneath having a name,” but that’s not a difficult search.

      Reply
  6. Michael Fiorillo

    A taxi-dispatching and food-delivery platform doth not a hundred billion-dollar company make. No matter how many laws and regulations they game, workers they exploit, or dumb-money investors they fleece.

    As for their automated vehicle delusion/hustle: it’s too preposterous (on any time frame this incarnation of the company can implement) to even seriously consider.

    Seems like lots of melodrama, slapstick, vanished capital and huge legal retainers on the horizon. Hopefully, these companies will face their existential just desserts (or at a minimum, strict regulation) before they succeed in destroying local mass transit.

    As always, thanks to Hubert Horan and NC for their irreplaceable work, which makes the oncoming cluster(family blog) of Uber’s IPO (including post-IPO price movements) seem all too predictable.

    Reply
    1. Amid Vats Hod

      Well said.

      I wonder when Netflix will pick up on Uber as it could slot nicely into the series ‘Dirty Money’.

      Reply
  7. Synoia

    1. What’s the cost of Drivers to Uber?
    2. What do the number look like with no drivers – Completely autonomous Cars?

    If (2) is Terrible, how does one short Uber pre IPO?

    How much will it cost to take an autonomous car round trip every way to work? Can this be compared to the cost of relocating so one can take a bus, walk or bike to work?

    Is User working on a self-driving motor bike ? /s

    Reply
    1. Joe Well

      You should read the earlier installments in this series where he explains 1) truly driverless (as opposed to just “self-driving” or “autonomous”) cars are nowhere near being ready and may never be ready since they depend on quantum leaps in AI; 2) Uber’s efforts in driverless cars have been pretty weak compared to competitors’.

      I wish that driverless cars were real because it could solve so many transportation problems, but wishing won’t make it so.

      Reply
      1. Brooklin Bridge

        What problems, from a public benefit pov, do you think truly automomous (no human intervention) cars solve that better and extensive public transportation with well paid human drivers wouldn’t solve?

        Reply
        1. flora

          Maybe Saudi investors think autonomous vehicles (pre-programmable for destination, etc) are just the thing. In K.S.A. women gained the right to drive only last year, in 2018. ….

          Reply
        2. Joe Well

          There are many places where population densities mean transit isn’t feasible. Even where there is transit nearby, it’s not fun carrying groceries for 20 minutes walking in the snow. Or do you like walking 20 minutes in slush between two points that aren’t connected by transit? There will always be a demand for cars and driverless cars could put those trips within reach of even people earning minimum wage.

          Reply
          1. Brooklin Bridge

            You make a good point about suburbs, or population densities, but I’m not sure it really distinguishes fully autonomous vehicles from, say, Uber drivers, as a public benefit, in this case available to the poor with the advantage of Uber (or a better paid but similar service) that at least someone makes a living rather than pure 100% rent extraction as would be the case with fully autonomous vehicles.

            Reply
            1. Brooklin Bridge

              Of course, Uber drivers as currently implemented is indeed private enterprise, but I see no reason that couldn’t be changed to a service provided by local government as part of the public transportation and managed in the same manner (software/internet). At that point, autonomous cars might also be a public service but while they might be numerically cheaper, in terms of public benefit, the version with human drivers would probably still be preferable or at least I don’t see the case where autonomous vehicles win given that criteria.

              Reply
              1. Joe Well

                Not sure if this quite answers your point, but here is my thinking. By definition, no one making minimum wage can afford to pay someone else to work for them, unless it’s something sporadic like a monthly haircut, or it’s subsidized like transit. So minimum wage earners will always be locked out of any ride program that uses human drivers. Driverless cars would be a game changer.

                Of course, there is nothing preventing transit systems from using driverless technology, and it could improve service particularly with paratransit which I’ve heard is a cruel joke almost everywhere.

                However what I’ve read on NC and elsewhere convinced me that driverless technology is not on the horizon. The AI would need to be much more sophisticated than is possible now.

                Reply
                1. Brooklin Bridge

                  It’s highly doubtful in our current environment that a private company that deployed fully autonomous vehicles (assuming it was possible at this time) would share the cost saving of getting rid of the human driver, if any, with it’s customers. Especially to the point where depressed areas could afford it on a regular basis as you point out. I doubt this would ever be a valid advantage of autonomous vehicles in the sense of public benefit unless subsidized and run by the state as part of public transportation.

                  But the technology is not being developed for public advantage; far from it. The massive investments to develop autonomous vehicles are not being made so that governments can live up to the, “for the people” part of thier charters. It’s being done with a concentrated view to eliminating automobile ownership altogether and replacing it with rent extracting vehicles. Government will certainly get a cut of that as part of the price of corruption, the cost of maintaining the fiction that autonomous vehicles are safer than human driven vehicles, for instance, and that will include considerable power over transportation down to the individual level of who is being taken where and why, but there will be no place in that model for the poor and not much more for any other forms of public benefit.unless having every detail of your transport, what you look like that day, what you are wearing, your mood, what you smoke or don’t smoke, etc., collected as data as part of the cost of getting to work or to where you want to go (no sightseeing or Sunday driving unless you pay extra), can be considered of public benefit.

                  Reply
    2. RMO

      Assuming completely autonomous cars (by which I mean ones which can perform at least as well and as safely as the average human driver in the actual road environment we have now) will be feasible in the near future – a dodgy assumption at this point – I see a big problem for Uber with replacing all their drivers: Right now, the DRIVER is responsible for finding, paying for, insuring, fueling, securing and maintaining the cars Uber runs its business on. I don’t see it as being feasible for Uber to go build, buy and run a vast fleet of autonomous cars, even if such vehicles become a reality.

      At first glance autonomous cars seem like a huge boon to transportation: just look at all the cars you see sitting in parking lots every day unused. With an autonomous car once it has delivered a passenger to where they want to go it can go off and be used by someone else, thus getting much more utilization. A big problem though is that of “rush hour” Two times daily a city will have vast quantities of people in cars going to work or back home. Autonomous cars can’t accommodate that much better than the cars we have now, even if you think that they can achieve better density and traffic flow and people do some car sharing. Good public transport and good urban planning is the only way to make that better and unfortunately Uber and robot car hype is undermining what public transport that exists right now.

      Reply
    3. Amid Vats Hod

      Uber loses ca 10% -15% of its drivers each month & it costs ca $600 each to replace them.

      Drivers leave because of wage theft & exploitation ie cannot make a living wage.

      At present Uber has zero real assets ie all the drivers own the cars. With Autonomous vehicles still decades away they will need to be owned by someone, serviced & stored. It is really fanciful to believe they will be better & be able to save Uber.

      Reply
  8. flora

    Horan’s real-world analysis – v. digital, ‘disruptive’, hopium sales pitch – has been enlightening. Thanks for this series.

    Reply
    1. Robert McGregor

      Has there ever been “hopium sales pitch” quite like Uber? No. It’s not “fraud” like Theranos or Madoff, because it’s out in the open. It’s a type of “idea fraud” or “malevolent fiction.” Yuval Harari talks about homo sapiens’ ability to tell elaborate fictions to advance their cause. The Uber claim is “So we’ve been losing money for several years, but that’s standard for a tech company,”except they aren’t really a “Tech Company.” But you can split hairs with the definition of “Tech Company.” The word “Technology” just comes from “Techniques,” so if a pygmy in the jungle has a frying pan over a fire, he can be said to be using cooking “technology.” Well that’s not “high” technology, but what is? The Uber App is pretty sophisticated, but not that far advanced beyond other dispatching software. Facebook is one of the top “technology companies” in the world, but as Jaron Lanier points out, Facebook added only a thin layer of new software technology to what was already there. I guess if Uber could figure out how to sell advertisements, then it could work. But Google and Facebook have that space pretty tied up, and banner ads in the Uber App and installed screens in every Uber car are not going to cut it.

      Reply
  9. KLG

    The one good thing about Uber and Lyft is that 20- and 30-somethings, whatever they are called, never have to worry about drinking and driving as long as they have a phone and an account…Of course, walkable neighborhoods and decent public transportation would also solve that and many other problems, too. But come to think of it, in many college towns “walking while slightly inebriated” will get you arrested for public intoxication, which certainly wasn’t true in the 1970s. Never mind.

    Reply
  10. bassmule

    From the FT’s Uber coverage:

    “Last year was our strongest yet, and Q4 set another record for engagement on our platform, said chief financial officer Nelson Chai in a statement.”

    I am wondering whether these are terms of art. What does it mean to engage on their platform?

    Reply
  11. Chester Hazlewood

    Ok, let me spell everything out in a simple as pie way. Uber/Lyft is just a dispatch service. Instead of calling for a taxi you punch a button on your phone. Sorry this doesn’t change the industry in a significant way ( however having a coke head billionaire in Dubai funding a good portion of the cost of the ride does, but that won’t last) Actually Uber/Lyft makes the cost of the ride go up because they are trying to charge 25% for just dispatching the order (even the most interprizing (greedy scumbag) cab dispatcher couldn’t get away with that. That’s like (I’m a cab driver in San Francisco) paying instead of $95 for the lease of the cab I’d have to pay $145 a shift which would be hard to do. Please bear in mind that the car I drive has company mechanics working on it after I drop it off, even still $145 is too expensive. (the company I work for is part of an industry denoting that they have the logistics of running a car 18 hours or more a day 7 days a week worked out) Driving your personal car you’ll have to pay retail for maintenance, and you’ll probably have to replace your car in 3 years if not sooner. (the automobile’s main purpose is not to get you A to B but to put money in the pockets of the folks that own the auto industry, sorry to shatter that illusion but we must grow up) The total cost of the auto I’d estimate at 45% of the take before we get to the 25% Uber/Lyft wants to add just for dispatching the order. That adds up to a whooping 70% of the take before taxes. Ladies and gentlemen of all ages…there…is the reason Uber/Lyft loses billions of dollars subsidizing it’s (suckers) drivers!

    Reply
  12. Chuck Cotton

    Both Uber and Lyft IPO are scams. Neither company has any OPERATING AUTHORITY ( 49CFR300-399)
    to transport passengers for compensation. Such unregulated companies operating portal to portal in a regulated industry( TRANSPORTATION) IS ILLEGAL AND A CRIME. All modes of public transportation such as air, rail, water and ground are highly regulated to protect the safety and welfare of the public. Uber and Lyft since their inception has conned the media, regulators, politicians, and law enforcement by claiming they are only an app technology company who owns no vehicles, nor employs drivers but only matches a passenger with a driver. The con game was a ponzi scheme to defraud the US Government, 42 States, and investors out of over $30B and the public for “rideshare” compensation-all without any operating authority.
    The main violation is of the RICO ACT being classified as a CCEs companies ( continuing criminal enterprises). Federal violations of the USDOT, FMSCA, FTC, FAA, FCC, IRS and the Dept. of Labor US CODES and the US Constitution are numerous.
    The SEC requirements are very strict for going public. The SEC can never approve Uber and Lyft because their submitted S-1 registrations are corrupt. For example, there has to be the last three years of outside certified audits of the books. None have ever been. Current in house accountants and associates have manufacture since consolidated financial data and that doesn’t even come close to the fanatical financial data put out or leaked ( purposefully).

    The unregistered stock sales have been diluted over 15 times for Uber luring in over $25B from naive investors. Goldman Sachs conned its private clients and others to rush in quickly with wet pens and check book with IPO promises which never happened. Now investors are dismayed and forcing management to get IPOs approved no matter what it takes so they can cash out.

    Already, SoftBank purchased $8.5B of the worthless stock and co-founder, Travis Kalanick, cashed out out some his stock for $1.4B. He is still a major stock holder and a BOD holding three seats. Kalanick and the early co-founders and investors also cashed a lot of their stock with the SoftBank purchase. These key figures still run the show and brought in new management to provide the smoke screen for the ponzi schemes. Lyft lured in Carl Icahn for a $100M purchase of its stock and many other noted investors.
    Yes the fraud is massive and once exposed, the SEC will kick them out as SEC Commissioner Jay Clayton’s reputation, like President Trump, he is not for sale and can not be bought.
    The horrific left and democrats like former California AG Kamala Harris and Maxine Waters let them operate in their home state criminally , freely, and without enforcement. These self proclaimed “rideshare”
    ( their own buzz word) once fully exposed will be known as the biggest CONCERTED criminal conspiracy in American history.

    Reply
    1. Amid Vats Hod

      Thank you Chuck & a lot of us are hoping you are correct.

      If so there is no chance for either Uber or Lyft to IPO hence only those investors already onboard will lose. This would be good & a lesson dished out.

      Obviously it will not end there as running a ponzi is clearly a crime & those involved must surely be prosecuted with prison terms & a forfeiture of any assets?

      The ripple effect will be huge involving Govts their representatives, officials, media etc.

      No doubt a lot will be disclosed?

      Reply
  13. Basil Pesto

    “If Uber raises the money they are hoping for, the Uber “problem” simply shifts from the current investors to the new public shareholders.“

    This is the major concern, I guess. That Uber’s PR is so good that its IPO will be a success regardless of the company’s operational reality, and it will be ordinary investors who lose out in a huge way, as opposed to the oportunists who threw in before it went public.

    Reply
    1. Amid Vats Hod

      Basil
      this is why the IPO must be halted or fail.

      Otherwise naive mum & dad investors will lose retirement savings.

      This transference of wealth is how criminal banksters like Goldman Sachs operate.

      Reply
  14. saul hudson

    Hey Yves, I’ve been driving boober/gryft for 4+ years now in one of the very few profitable markets. Just last week, both companies made a material nation wide change regarding the surge system. The OLD surge was very simple. It was just a price multiplier so your ride would be 2x (or whatever) the base price and then uber would take their cut from the total.

    Now, under the new system, the driver just gets a flat “bonus” usually in the $3-$7 range (pathetic) while the passenger is STILL charged via the old multiplier method. The net effect is the surge pricing has been transferred away (the bulk of it anyway) from the driver and back to boober.

    This won’t be enough to save their asses as surge pricing kills demand pretty quickly but it’s one more trick they’re employing to screw over drivers.

    Reply

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