4 ms·

Stock based compensation is a big chunk of that which arguably doesn't really cost Uber anything really. I think the bigger takeaway is that its STILL 500 milli

Stock based compensation is a big chunk of that which arguably doesn't really cost Uber anything really. I think the bigger takeaway is that its STILL 500 million dollars lost per quarter which is insane.

cco 7y ago
What do you mean it doesn't cost them anything?
- kgwgk 7y ago
  They pass the cost directly onto the shareholders :-)
- adjkant 7y ago
  https://www.ft.com/content/6999dc72-893e-11e9-97ea-05ac2431f453 https://www.ft.com/content/6999dc72-893e-11e9-97ea-05ac2431f... This explains it decently IMO > Assume that you own a business that has an overall value of $100m and generates $10m in annual income, and that you hire me as your manager. Assume also that my compensation is $1m and that rather than pay me with cash, you give me 1 per cent of the business as compensation. While you may maintain the fiction that this is a non-cash expense and that your income is still $10m, you are now entitled to only 99 per cent of that income in perpetuity. In effect, your share of the business is worth less and it will get even smaller over time, if you continue to pay me with equity. But if you are a common stockholder in any company that grants options or restricted stock to its employees, then you are in exactly the same position. While it's obviously bad for shareholders, it basically dilutes their profits in the future, but if those never come, who cares about that dilution? I think it would affect my opinion of the stock long term, but short term any way they get towards profitability minus stocks is a way that someone actually sees a dividend. But of course, most people actually looking to buy and sell individual stocks won't really care a ton about the dividends IMO. And it's not like people really use voting rights today on tech stocks even if they are offered. It's always fascinated me that stock games like that really come down to just betting on future performance compared to the opinions of others. It's comically confidence based and nothing else. So if Uber were to eve somehow reach profitability minus stock compensation, their business itself could actually take advantage, even if the shares of others were diluted in terms of dividends.* So if you're buying and selling stocks individually in the current pattern, Uber hitting that middle zone of technically nonprofitable but adjusted profitable would be a good sign for long term resilience, however that factors into the current confidence equation. How the stock market hasn't been classified as gambling at this point is wild to me. *I'm actually not personally clear on if it is a dilution or those specifics, its surprisingly hard info to find online easily. One thing is clear though: the company's cash flow itself is not affected at all.
josteink 7y ago
> I think the bigger takeaway is that its STILL 500 million dollars lost per quarter which is insane. And that’s to develop and maintain an app, probably one of the absolutely cheapest things one can do in any industry. Quite maddening indeed.
- shaneprrlt 7y ago
  I think that is massively trivializing the technical complexity of engineering a system that powers millions of rides, food orders, freight orders, etc globally every single day. As an example, look at how they've improved upon GPS in urban areas to take into account satellite visibility to determine which side of the street you're on: https://eng.uber.com/rethinking-gps/ https://eng.uber.com/rethinking-gps/ They invest tons into just solving small problems like that. Not to mention all the open source work they do, ATG, etc. Then consider that Uber has to have pretty big operations, sales, marketing, and support teams in each market they operate in. It's not just a handful of engineers working in SF. Their massive costs considering their scale makes total sense to me. This is not to conclude one way or another whether or not they are a viable business.
georgeecollins 7y ago
That makes sense. I see based on p. 28 - 29 it looks like they spent about ~500m in this quarter on stock based compensation. So I guess the argument would be if they have more salary type employees and they blew off some of their new money losing divisions they would be closer to break even. I think you can argue that in the long run Uber doesn't need to be more high tech than FedEx or WalMart. They are an app powered by logistics. You maybe don't need to offer Silicon Valley incentives to do that in the long run.

cco 7y ago

What do you mean it doesn't cost them anything?

kgwgk 7y ago
They pass the cost directly onto the shareholders :-)
adjkant 7y ago
https://www.ft.com/content/6999dc72-893e-11e9-97ea-05ac2431f453 https://www.ft.com/content/6999dc72-893e-11e9-97ea-05ac2431f... This explains it decently IMO > Assume that you own a business that has an overall value of $100m and generates $10m in annual income, and that you hire me as your manager. Assume also that my compensation is $1m and that rather than pay me with cash, you give me 1 per cent of the business as compensation. While you may maintain the fiction that this is a non-cash expense and that your income is still $10m, you are now entitled to only 99 per cent of that income in perpetuity. In effect, your share of the business is worth less and it will get even smaller over time, if you continue to pay me with equity. But if you are a common stockholder in any company that grants options or restricted stock to its employees, then you are in exactly the same position. While it's obviously bad for shareholders, it basically dilutes their profits in the future, but if those never come, who cares about that dilution? I think it would affect my opinion of the stock long term, but short term any way they get towards profitability minus stocks is a way that someone actually sees a dividend. But of course, most people actually looking to buy and sell individual stocks won't really care a ton about the dividends IMO. And it's not like people really use voting rights today on tech stocks even if they are offered. It's always fascinated me that stock games like that really come down to just betting on future performance compared to the opinions of others. It's comically confidence based and nothing else. So if Uber were to eve somehow reach profitability minus stock compensation, their business itself could actually take advantage, even if the shares of others were diluted in terms of dividends.* So if you're buying and selling stocks individually in the current pattern, Uber hitting that middle zone of technically nonprofitable but adjusted profitable would be a good sign for long term resilience, however that factors into the current confidence equation. How the stock market hasn't been classified as gambling at this point is wild to me. *I'm actually not personally clear on if it is a dilution or those specifics, its surprisingly hard info to find online easily. One thing is clear though: the company's cash flow itself is not affected at all.

josteink 7y ago

> I think the bigger takeaway is that its STILL 500 million dollars lost per quarter which is insane. And that’s to develop and maintain an app, probably one of the absolutely cheapest things one can do in any industry. Quite maddening indeed.

shaneprrlt 7y ago
I think that is massively trivializing the technical complexity of engineering a system that powers millions of rides, food orders, freight orders, etc globally every single day. As an example, look at how they've improved upon GPS in urban areas to take into account satellite visibility to determine which side of the street you're on: https://eng.uber.com/rethinking-gps/ https://eng.uber.com/rethinking-gps/ They invest tons into just solving small problems like that. Not to mention all the open source work they do, ATG, etc. Then consider that Uber has to have pretty big operations, sales, marketing, and support teams in each market they operate in. It's not just a handful of engineers working in SF. Their massive costs considering their scale makes total sense to me. This is not to conclude one way or another whether or not they are a viable business.

georgeecollins 7y ago

That makes sense. I see based on p. 28 - 29 it looks like they spent about ~500m in this quarter on stock based compensation. So I guess the argument would be if they have more salary type employees and they blew off some of their new money losing divisions they would be closer to break even. I think you can argue that in the long run Uber doesn't need to be more high tech than FedEx or WalMart. They are an app powered by logistics. You maybe don't need to offer Silicon Valley incentives to do that in the long run.