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Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares
- chollida1 9y agoBetter source, and one that the article references: https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-quarter-loss-is-said-to-widen-to-1-46-billion https://www.bloomberg.com/news/articles/2017-11-29/uber-s-th... At this point, two things are clear to me: 1) Uber will IPO, there's just oo much money and influence behind it to stop that. 2) I'd be really worried if I was an employee about my options and also about my job. Employee's now ahve two large worries hanging over their heads..... What about my job and what about my options... With Uber preparing for an IPO, they'll od what most companies do, clean up their balance sheet. And with the losses piling up they'll start cutting costs, which as for most tech companies starts with employee's. And now I don't htink anyone believes that they'll IPO at anywhere close to the 60+ Billion valuation they had a year ago. Infact SNAP looks like a great model to study for what an Uber IPO might look like, lots of good first day to week action with price rises but then a steady stream of down days leading up to their first quarter report which will almost certainly show them loosing money and then much larger short interest leading up to a huge lock up expiry of their employee's options. Given how much money institutional investors put into the company, and the late stage at when they did and given how much they valued the company at, I'd be very afraid if I was an option holding employee at just how many shares are going to flood the market before I get to try and redeem my own options. And to top it all off, the biggest thing driving their valuation recently, self driving cars, appears to be in serious jeopardy, can anyone make a credible case of Uber having self driving fleet in the next 5 years? EDIT to those of you who i confused with layoffs. No one is saying that Uber needs to be profitable when they go public, but their burn rate had better be decreasing. T hey don't need to fire 3 billion dollars worth of salary, no one would think that's a wise move, but they had better show they are moving towards profitability, and the easiest way to show this is a string of quarter where their quarterly loss is decreasing and the easiest way to do that is to cut costs and the largest cost is people.
- hatred 9y agoI couldn't understand the part about an employee and loosing my job. Are you saying that they won't be able to sell their equity even at a steep discount in 90 days? Even, if they incur a loss of ~30-40% over the current prevailing price; it would still be a fortune. They can easily do that to save on the tax or did you mean something else?
- sleepychu 9y ago1) They're worried they'll be fired to make the IPO work. 2) They're worried the value of their options will drop out before they have the option to exercise them.
- wpietri 9y agoAnd I would add that in situations like this, employees should be very careful assuming that they'll get a price anything like what the most recent investors are getting. Check out Table 2 here, down on page 45: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2955455 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2955455 It uses Square as an example. The headline valuation price from their E round suggests that a share of stock was worth $15.46. But later investors can have all sorts of preferences. Common stock, though, is valued at $5.62. As people who were here for the last bubble know, this is exacerbated when valuations dip. I know a number of people who worked their asses off for companies that got sold for hundreds of millions of dollars. But the employees saw nothing, because investors get paid first.
- deleted 9y ago[deleted]
- thisisit 9y agoWell, let's use the SNAP example which has been quoted above. They went public earlier this year. With burgeoning balance sheet they have to fire people: https://www.businessinsider.in/Snap-hit-with-more-layoffs-plans-to-slow-hiring-in-2018/articleshow/61156322.cms https://www.businessinsider.in/Snap-hit-with-more-layoffs-pl...
- everdev 9y agoIs this abnormal given their size? I remember similar articles about Facebook, Twitter and others.
- StevePerkins 9y agoDid pre-2012 Facebook and Twitter ever 1.5B in a single quarter, running a website?
- ivanech 9y agoIt is - Twitter lost ~$2 billion over 10 years (http://time.com/4241716/twitter-losses-twtr/ http://time.com/4241716/twitter-losses-twtr/). $1.5 billion in a quarter is nuts.
- _jal 9y agoIt certainly allows recycling jokes from 2000. "They may be losing money on every sale, but they'll make it up on volume."
- mark-r 9y agoThat joke is a lot older than that.
- mtremsal 9y agoUber has raised more than $11B over the years. Does anyone know how much of that is left and what their runway is? edit: runway to IPO I meant
- danmaz74 9y agohttps://news.ycombinator.com/item?id=15817179 https://news.ycombinator.com/item?id=15817179
- apocalyptic0n3 9y agoApparently they are at about $5.1B cash-on-hand, not including the potential $1B SoftBank investment. So they have about a year of runway right now.
- alpha_squared 9y ago> So they have about a year of runway right now. I think that assumes their burn rate will not increase. Which, historically, is not the case. At their current increase of burn, assuming it is linear, they're probably looking at less than a year. Maybe even as little as 9 months.
- albertgoeswoof 9y agoIt is strange that private investors are willing to fund my discounted travel.
- StevePerkins 9y agoI seriously don't understand the endgame here. Apparently, it WOULD BE possible to completely kill off the legacy taxi industry given 10 years or so of artificially subsidized pricing. So I understand the concept of disrupting a previous oligarchy, replacing it with a new monopoly, and then profiting through rent seeking. But where are the barriers to entry that would allow Uber to solidify as that new monopoly? There's already Lyft today... and once Uber starts to charge their true costs, then we'll likely see numerous other competitors emerge to compete on price. Ultimately, they're just a phone app! Most Uber drivers today are running the Uber app and Lyft app side by side anyway. The usual playbook calls for the early leader to pay off politicians, and have them write new laws or regulations that raise the barrier to entry for future competitors. But Uber's playbook has been to take an antagonistic stance toward politicians, rather than buying them off. So what's to stop some newer competitor from beating them on price... or some huge company to swoop in after Uber establishes the market, and beat them by cross-promoting and leveraging their other lines of business?
- pishpash 9y agoUber's endgame has been making an Uber of everything (e.g. Uber eats), i.e. a platform for the so-called 'sharing economy.' They obtain this by network effects. That and self-driving cars, I don't know. They're basically an R&D operation funded by investors. It may or may not pan out.
- LeifCarrotson 9y ago> They're basically an R&D operation funded by investors No, they're basically a taxi service funded by investors. They served almost $10 billion in rides, and lost $1.5 billion in this single quarter. Other projects, like UberEats and self-driving car R&D are, in comparison, little more than distractions at present. You can buy self-driving companies or restaurants and employ an army of self-driving engineers for a billion dollars a year, and have that be a tiny fraction of those financials.
- JumpCrisscross 9y agoUber had $6.6bn on hand at the end of June [1]. That means they are down to $5.1bn. Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them. [1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cash-at-a-rate-of-2-billion-a-year/ https://venturebeat.com/2017/08/23/uber-is-still-burning-cas... [2] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-trial.html?referer=https://news.ycombinator.com/ https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...
- mylons 9y agothe waymo case will certainly take some time to play out, wont it? I'm assuming year(s), but that's just a guess.
- jethro_tell 9y agoProbably, but can they successfully go public with that unsettled?
- jdp23 9y agoCan they successfully raise money at a huge valuation with that case unsettled, news that they (almost-certainly-illegally) hid a data breach, a potential class-action lawsuit about sexual assault by their drivers, a business model that shows no signs of breaking even, etc. etc. etc.? If so, they then probably think they can go public with all of that baggage.
- jethro_tell 9y agoThat is only half of the equation though. They also have to open their books which may complicates some of those issues.
- deleted 9y ago[deleted]
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- thisisit 9y ago> as the ride-hailing leader struggled to fend off competition, legal challenges and regulatory scrutiny A good read on this topic calling these business Regulatory Entrepreneurship : https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741987 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741987
- ianai 9y agoAnecdotally, Uber seems to have a large foot print. If it were to fail I wonder how much the economy would be affected? Ie would it start an end of much of the sharing economy - and thus trigger some market corrections?
- delecti 9y agoI suspect there are enough competitors (Lyft, Eat24, etc) that would pick up the slack almost immediately.
- rimliu 9y agoAnd I am sure most places have local competition. In my city there were at least three companies doing the same before Uber even showed up.
- gaius 9y agoLOL if Uber disappeared tomorrow you would get the same driver in the same car on Lyft or another app and the day after that would have forgot Uber ever existed.
- TsomArp 9y agoI am sorry, but I don-t understand why they lose so much money. They take 30 % of all trips, they don-t have cars, they don-t pay salaries to drivers. Is it the infrastructure so expensive?
- blowski 9y agoThey have a lot of expensive developers, lawyers and marketing deals.
- calgaryeng 9y agoMarketing and ride subsidies?
- Tiktaalik 9y agoThey subsidize rides (in many jurisdictions) so presumably they're not making much money on that 30% cut.
- ErikVandeWater 9y agoProbably most of there losses are explained by markets they are trying to develop and also expansion into areas where they do not yet have drivers. I can't imagine the cost would increase too much going forward - it's essentially the same as the cost of delivering pizza, and pizza isn't too expensive, and riders can pool, so it should be below the cost of pizza to deliver a person. And once people start giving up cars for Ubering, pooling will become much more efficient.
- potatolicious 9y agoIn many markets they pay drivers more than they make on each ride - significantly more. It happens in various forms, but I suspect minimum-payout subsidies are one of the main causes. In many cities Uber is trying to shorten wait times (so there's a car very close to you always), and the only way to do this is to flood the streets with drivers. Flooding the streets with drivers lowers each driver's earning ability, since there are now more drivers competing for the same number of passengers. To make sure drivers don't quit, Uber has been in the habit of guaranteeing payouts - if you work this area during a particular time period, they guarantee you a minimum level of earnings, paying you the difference if there aren't enough passengers. This is a big part of how they lose money - in order to maintain a system where a car is always nearby, they need to pay drivers a lot more than they make from the passengers.
- bob_theslob646 9y ago> Uber Technologies Inc.’s net loss widened to $1.46 billion in the third quarter, according to people with knowledge of the matter, as the ride-hailing leader struggled to fend off competition, legal challenges and regulatory scrutiny. "according to people with knowledge of the matter.." How is reporting like this legal? Is this not speculation? It baffles me that no fact checking/ benchmarking exists for such a major news platform.
- mratzloff 9y agoIt's strange to me that you assume that just because sources aren't named in public that no fact checking occurred. As far as legality, there is a system in place; if it's false, it's handled in civil court.
- bob_theslob646 9y ago>It's strange to me that you assume that just because sources aren't named in public that no fact checking occurred. It's hard to take things seriously when people/organizations do not take/put skin in the game. From a risk perspective it is genuis, but from a readers perspective it is problematic in my opinion.( I am not a fan of gossip) What's stranger to me is how you assume that they fact check.... For all I know they do, but it defeats the purpose of confidentiality agreements if sources speak up when they are explicitly told not too. (I am referring to confidential finance contracts)
- dragonwriter 9y ago> How is reporting like this legal? Why wouldn’t it be? > Is this not speculation? No, in the same way that court decisions based on witness testimony are not. It is, of course, difficult for outside parties to verify the reporting, but journalism has never been legally bound to the standards appropriate to scientific research where reproducibility is key. > It baffles me that no fact checking/ benchmarking exists for such a major news platform. The absence of named sources does not imply the absence of fact checking.
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- lordnacho 9y agoHow much of it operating the part everyone is familiar with, vs investment into the self-driving cars and other expenses?
- ilamont 9y agoWhat's to stop Uber from slowing the burn via an increase in base prices? People would still use Uber as long as it's A) more convenient than other transportation B) better quality rides than cabs and C) just a little cheaper than cabs. There are surely other forms of revenue they can spin up too, but this seems to be pretty straightforward, especially in markets where they have already decimated local taxi firms.
- misun78 9y agoIncreased competition. Lyft is burning through money at an unprecedented rate to catch up with Uber given that they smell blood this year and investors ala Google are willing to subsidize the burn. At some point, this has to stop but 2017 does not seem to be the year. Source: Lyft pushes back profitability after increased burn - https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-financials/ https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-...
- pishpash 9y agoLooks like the easy Fed money made it into consumers' pockets after all.
- blhack 9y ago>Increased competition. Maybe I'm weird, but: 1) I don't even look at what the price of lyft is. So they could up the price by a significant percentage I wouldn't even notice. 2) Even if Uber was more expensive than lyft, I would almost definitely still take uber.
- misun78 9y agoYou're not weird and this is precisely why Uber is still the market leader. But there is a cohort, in some specific areas where Lyft's network is on par with Uber's such that price, and more specifically targeted discounts, do play a part. Lyft can analyze which one of its riders has not taken a ride in a while (and is hence presumably using Uber) and target them with discounts.
- creator_lol 9y agoVery relevant here: http://www.businessinsider.com/australian-fund-manager-calls-uber-a-ponzi-scheme-2017-5 http://www.businessinsider.com/australian-fund-manager-calls...
- Animats 9y agoOK, a down round at last. "The sale of those shares would value the business at $48 billion, a 30 percent discount to the last private valuation." I'll bet that gets trimmed even more if the deal closes. Losses are increasing, not decreasing.
- code4tee 9y agoAnd of course given how things have been going for them in the courts this week all signs point to a massive hit in the Waymo lawsuit. They still don’t have a real business (a company kept on life support by constant external cash injections is not a real business).