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GM invested $500 million in Lyft earlier this year. I guess, they have a different view on where the market is headed. http://www.reuters.com/article/us-gm-lyf

GM invested $500 million in Lyft earlier this year. I guess, they have a different view on where the market is headed. http://www.reuters.com/article/us-gm-lyft-investment-idUSKBN0UI1A820160105 http://www.reuters.com/article/us-gm-lyft-investment-idUSKBN...

mmackh 10y ago
Direct quote from the article "Hill believes ride-sharing may be here to stay, but Uber is not"
- nawtacawp 10y ago
  I wish he would have expanded on that. Why would one fail and another not, when the companies have the exact same model?
  - jimminy 10y ago
    I explained above, but Uber is way over-valued to the point that they cannot have a reasonable IPO and acquisitions are off the table to all but a few companies that don't need that business and can acquire a direct competitor at a more reasonable expense.
    - prostoalex 10y ago
      Box and Facebook both had IPOs that priced them below the last private round, and yet are limping along. Seems like positive cashflow is the key.
      - jimminy 10y ago
        For Facebook, that is absolutely false. Their last known valuation prior to IPO based on a raise was $65B (March 2011), they IPO'd at $104B. And Box had a small downward valuation shift (-36%, -$0.9B), between last raised valuation and IPO. Uber's numbers even giving them liberal growth potential of 500% places them at around $33.75B (-50% current value, -$34B).
        prostoalex 10y ago
        Well, you're right, FB initial IPO price on day 1 was above the pricing in the last private round. However, shortly after, and by "shortly" I mean within 3-4 months after the IPO when most of the insiders were still under lock-up, a single share of FB could've been bought for high teens, which was at a significant discount to the last round.
        jimminy 10y ago
        That discussion isn't that relevant, when you're trying to figure out this kind of valuation though. The reason for that dip was largely 90 and 180 day lock-ups increasing supply of shares traded as employees sold stock. Also there were economic fears helping pressure the stock down. FB's valuation at IPO was still smaller than it's primary domestic market's (ad spending) size ($165B in 2012). Uber's primary domestic market (taxis) is only valued at ($20B), so if they captured all of the US taxi, their current valuation requires them to capture over 300% of the market.^ Now obviously that's not a perfect barometer. There are other variables and adjustments to make, but it makes it very clear that there is limited upside potential. Without claiming another market (ownership), it's actually damn near impossible. They've also ceded competition in the Chinese market to DiDi, so they can't make it up via global expansion either. ^edit (Obviously, this is a 1x multiple, as you increase to more reasonable values it drops the share required, but you have to push it pretty hard to reduce market share to a decent level.)
jimminy 10y ago
The valuations and conditions between Lyft and Uber are drastically different. Lyft with the funding from GM has only raised $2B over it's lifespan which is comparable to that of Uber. Uber has raised nearly $13B and blown through most of it. At their last round, Lyft is valued at about $6B and Uber is valued at $68B. One of these is reasonable based on the taxi market size (domestic $20B), the other is about 2x over the assumed value with decent market share and margins it could attain. The only way for Uber to express the value on the books is to replace car ownership, which is unlikely with the turnover rate of individuals replacing their cars, they'll need about a decade or more runway to justify the current valuation. Lyft and GM have an advantage in the race to replace ownership, with their partnership. Lyft gets a partner that can reduce cost of vehicle supply costs and maintenance, while GM gets a hedge against a possible headwind to their current business model.
- nawtacawp 10y ago
  Thanks for the answer, makes perfect sense.
- brandelune 10y ago
  The problem with Uber is not the business model, it's the hype that leads to overvaluation as you properly show. Too bad the article does not make that crystal clear.
  - jimminy 10y ago
    Part of it is business model, they've outsized their market potential which is a failure of their model. It's a bit of a chicken and the egg, because it's absolutely related to their valuation. That valuation is based on a flaw somewhere in their model potential, which feeds back into the model of potential (via expressing oversized outside interest).

mmackh 10y ago

Direct quote from the article "Hill believes ride-sharing may be here to stay, but Uber is not"

nawtacawp 10y ago
I wish he would have expanded on that. Why would one fail and another not, when the companies have the exact same model?
- jimminy 10y ago
  I explained above, but Uber is way over-valued to the point that they cannot have a reasonable IPO and acquisitions are off the table to all but a few companies that don't need that business and can acquire a direct competitor at a more reasonable expense.
  - prostoalex 10y ago
    Box and Facebook both had IPOs that priced them below the last private round, and yet are limping along. Seems like positive cashflow is the key.
    - jimminy 10y ago
      For Facebook, that is absolutely false. Their last known valuation prior to IPO based on a raise was $65B (March 2011), they IPO'd at $104B. And Box had a small downward valuation shift (-36%, -$0.9B), between last raised valuation and IPO. Uber's numbers even giving them liberal growth potential of 500% places them at around $33.75B (-50% current value, -$34B).
      - prostoalex 10y ago
        Well, you're right, FB initial IPO price on day 1 was above the pricing in the last private round. However, shortly after, and by "shortly" I mean within 3-4 months after the IPO when most of the insiders were still under lock-up, a single share of FB could've been bought for high teens, which was at a significant discount to the last round.
        jimminy 10y ago
        That discussion isn't that relevant, when you're trying to figure out this kind of valuation though. The reason for that dip was largely 90 and 180 day lock-ups increasing supply of shares traded as employees sold stock. Also there were economic fears helping pressure the stock down. FB's valuation at IPO was still smaller than it's primary domestic market's (ad spending) size ($165B in 2012). Uber's primary domestic market (taxis) is only valued at ($20B), so if they captured all of the US taxi, their current valuation requires them to capture over 300% of the market.^ Now obviously that's not a perfect barometer. There are other variables and adjustments to make, but it makes it very clear that there is limited upside potential. Without claiming another market (ownership), it's actually damn near impossible. They've also ceded competition in the Chinese market to DiDi, so they can't make it up via global expansion either. ^edit (Obviously, this is a 1x multiple, as you increase to more reasonable values it drops the share required, but you have to push it pretty hard to reduce market share to a decent level.)

jimminy 10y ago

The valuations and conditions between Lyft and Uber are drastically different. Lyft with the funding from GM has only raised $2B over it's lifespan which is comparable to that of Uber. Uber has raised nearly $13B and blown through most of it. At their last round, Lyft is valued at about $6B and Uber is valued at $68B. One of these is reasonable based on the taxi market size (domestic $20B), the other is about 2x over the assumed value with decent market share and margins it could attain. The only way for Uber to express the value on the books is to replace car ownership, which is unlikely with the turnover rate of individuals replacing their cars, they'll need about a decade or more runway to justify the current valuation. Lyft and GM have an advantage in the race to replace ownership, with their partnership. Lyft gets a partner that can reduce cost of vehicle supply costs and maintenance, while GM gets a hedge against a possible headwind to their current business model.

nawtacawp 10y ago
Thanks for the answer, makes perfect sense.
brandelune 10y ago
The problem with Uber is not the business model, it's the hype that leads to overvaluation as you properly show. Too bad the article does not make that crystal clear.
- jimminy 10y ago
  Part of it is business model, they've outsized their market potential which is a failure of their model. It's a bit of a chicken and the egg, because it's absolutely related to their valuation. That valuation is based on a flaw somewhere in their model potential, which feeds back into the model of potential (via expressing oversized outside interest).