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About time a profitless company gets what it deserves. I've been concerned with endless VC funding for years. From what I've seen, most current tech companies
by jshowa3 7y ago
About time a profitless company gets what it deserves. I've been concerned with endless VC funding for years.
From what I've seen, most current tech companies are not doing well going public. I remember a similar lukewarm response when Snapchat went public.
In fact, I probably would've advised them to stay private. Tech companies have seemed to survive indefinitely bleeding VC money.
My guess is the stock will probably recover after a couple months.
- fxfan 7y agoUnpopular opinion here but _excessive_ VC funding and valuation are against free-market and hurt the economy and most regular people in the long run.
- human20190310 7y agoWhy would it recover?
- icedchai 7y agoMost "profitless" tech companies do just fine on the public markets as long as they show consistent revenue growth. Take a look at multi year charts for HubSpot (HUBS) and Twilio (TWLO), for example.
- olliej 7y agoThe problem with Uber (and Lyft) is that their losses are also scaling with “growth”. As an alternative take amazon: they made a loss for years and years, but the size of their losses were reducing every year as they grew. The demonstrates a path to profit. Of course for all these companies who have lost value post-IPO have already got the cash they were after. Post-IPO changes to value don’t change that and only impacts people who purchased at the inflated price.
- icedchai 7y agoYes, and the same is true of many of these public SaaS companies. Their losses are increasing proportionally to their revenue, mainly due to huge marketing spend.
- _sword 7y agoNot really. When you take a look across the landscape of companies such as CRM, NOW, WDAY for enterprise SaaS, or even DBX for consumer-facing SaaS, their margins and free cash profiles tend to be around the mid-teens on Non-GAAP op. margin and 20-30% for annual free cash flow margin. Most institutional investors in growth software are looking for a blend of free cash generation and margin improvement, and out of those enterprise SaaS names all but Salesforce have been consistently delivering this.
- aliston 7y agoThat's not true RE: losses scaling with growth. Uber's losses last year narrowed while revenue still grew considerably. I think with the public market's emphasis on profitability, Lyft and Uber will both raise prices and cut incentive spend in sync, making them both more profitable over time.
- martinald 7y agoNo, that's not true. Uber's losses in 2018 were about the same as 2017, if you take out the income they raised from shutting down Russia and SE Asia and selling (merging?) those operations to Yandex/Grab. This is quite clearly a one time event.
- aliston 7y agoGo look at the p&l... top line revenue was up ~3 billion while costs were only up ~2 billion.
- zawazzi 7y agoReally? My perspective is that I use Uber as a substitute good for owning a car. If the cost of uber > car, I'm gonna go and buy one. So they can raise prices, but likely there's quite a bit of price sensitivity, particularly from their high volume users.
- bdcravens 7y agoTwilio took $255M in funding, not $17.5B. Entirely different set of expectations for a backend software company and a company that is trying to redefine transportation.
- icedchai 7y ago"Redefine transportation" is going a bit far. Maybe the public realizes Uber's basically a taxi company without any taxis...
- treis 7y ago>About time a profitless company gets what it deserves. Yes, a 63 billion dollar market cap is sure showing them! >Tech companies have seemed to survive indefinitely bleeding VC money. That's somewhat of the issue here. The outcome for VCs at this price is still somewhere between massive return and breaking even. It's the public at large that bought into the IPO via retirement funds that is hurting the most.
- mfatica 7y agoI highly doubt in the few days Uber has been on the market the "public at large" has purchased any significant share of Uber using their pension accounts. It's not in an indices so they're certainly not exposed through that.
- treis 7y agoI said the public at large via retirement funds. Teachers get less because CalSTRS lost money* either via direct purchase or through asset managers. * Just an example I don't know if they bought into the IPO or not.
- throwaway2048 7y agoLarge index weighted funds don't buy into IPOs until significantly after the fact.
- jpmattia 7y agoReally? For the CalSTRS example, they issued PR that they bought into the FB IPO, and had also bought into pre-IPO private companies. eg: > CalSTRS has owned shares in Facebook, Inc. since its initial public offering in 2012, as well as through privately held assets prior to the IPO. https://www.calstrs.com/statement/calstrs-ongoing-engagement-facebook-focuses-risk-mitigation https://www.calstrs.com/statement/calstrs-ongoing-engagement...
- 7y ago
- burtonator 7y ago> I've been concerned with endless VC funding for years. Their goal is to build monopolies by out-funding every other entrant in the space. Reid Hoffman calls it blitzscaling.
- konschubert 7y agoIt doesn't work if you don't build a moat.
- usefulcat 7y agoThat tends to not work so well when the product is a commodity.
- runako 7y agoIt worked for Amazon.
- konschubert 7y agoAmazon's warehouses and logistics network provides scale effects that create a moat.
- runako 7y agoContemporaneously, this was not seen as an advantage. Notoriously, Webvan invested heavily in these two line items and didn't get any moat from them.
- bsder 7y agoAmazon had a 5-10% pricing advantage for years over everybody else because nobody was paying sales tax on their purchased items. Uber and Lyft do not have that kind of advantage.
- runako 7y agoIt's funny you say that. I've been having discussions with people who are making the claim that Uber & Lyft have an unfair pricing advantage because VCs are subsidizing them, and because they have ignored local licensing rules.
- WhompingWindows 7y agoWho precisely is getting what they deserve? Can't the employees cash out their stocks? They may be worth less than projected, but they can still get a pay-off now?
- JakeTheAndroid 7y agoI am not a tax person or a stock person, but what I have been told at the start-ups I have worked at, you have to wait 6 months after an IPO before you can sell or something along those lines. So, yes, the employees can sell their stock, but not right now. They didn't get the chance to sell at the potential high.