After almost a decade of interruptions, Uber is finally making itself public. The company is the most valued technology IPO from Facebook and Alibaba, and is part of a wave of Silicon Valley "unicorns" that will be released this year, including Airbnb, Zoom and Slack. While today's debut represents a new chapter for Uber, prone to scandals and losing money, it is also likely to signal the end of an era of cheap travel for millions of drivers and pilots around the world.
Here you have everything you need to know about the great day of Uber.
What is the deal with the valuation of Uber? It's up, it's down …
At the end of last year, the expectation was that Uber would go public for a whopping $ 120 billion, almost double the company's valuation in a fundraising round since August 2018. That would have made Uber more valuable than General Motors, Ford and Fiat Chrysler – Detroit's "Big Three" automakers combined.
But as the public offering approached, that valuation began to slide. Earlier this week, Uber said it expected a price of its initial public offering between $ 44 and $ 50 per share, eventually settling at the lower end of $ 45. At that price, the company will have a value of about $ 75.46. billion, which makes it one of the most valuable companies to go public, but that's a 38 percent drop in its estimated valuation since October 2018.
What happened? A lot of things, especially the experience of the main rival Lyft since it was made public at the end of March. Since then, their shares have fallen more than 25 percent. Lyft also reported losing the staggering $ 1.1 billion in its first quarter earnings, which the company came to 2019 as a year of "maximum loss."
Expect the same from Uber. The horseback riding company already loses about $ 800 million per quarter, and is significantly larger than Lyft, with a global reach and numerous secondary companies such as food delivery and transportation.
When CNBC asked if 2019 would also be a year of maximum losses for Uber, CEO Dara Khosrowshahi said that was the "intent". Uber already loses obscene amounts of money; It will be interesting to see how markets react to accelerated cash losses later this year.
Wait, what about Travis Kalanick?
Well, very fast because this is a little mean: the co-founder and former Uber CEO, Travis Kalanick, was not invited by Khosrowshahi to help ring the bell in the New York Stock. Exchange this morning, which some see as a great snub.
If you remember, Kalanick was the face of the company during the year of Uber annus horribilis in 2017, when self-inflicted scandals began to pile up as rental vehicles on the 101 Freeway. He was ejected in mid of 2017 and replaced by Khosrowshahi, but remains an important player in the company as a board member and a minority shareholder.
Kalanick wanted to help ring the bell today, but Khosrowshahi said no. It seemed like a movement designed to emphasize Uber's future instead of his past. But, of course, all anyone could think was " drama !"
When asked about Kalanick's absence on the stand, Khosrowshahi told CNBC that those spaces were reserved for "long-time employees who have been with us, skinny, and drivers and messengers who use our service. that the dais must honor. " That said, he also praised Kalanick for his "genius" and noted that the former CEO was still there to celebrate and rub shoulders with executives and investors.
Okay, now the audience of Uber. What does that mean for me?
Most of the sums we are talking about are huge, abstract and do not mean much to the average person. Assuming you are not Jeff Bezos (unless you are – hello, Jeff!) Or Kalanick, Uber will not publicly release billions of dollars in your bank account.
To answer that question, however, depends on what kind of person you are. Are you a person who uses Uber frequently or frequently? If so, Uber's IPO probably means more expensive trips in the near future.
But, you may ask, is not Uber in a price war with Lyft? And that should not mean cheaper rates, not more expensive? Perhaps in some markets, Uber will cut prices for Lyft poachers, but that probably will not last long. Both companies are now public and will face pressure from large investors and shareholders each quarter to contain their losses.
As mentioned above, both Uber and Lyft are big money losers. In 2018, Uber reported an operating loss of $ 3 billion in revenues of $ 11.3 billion, and its accumulated deficit reached almost $ 8 billion at the end of last year.
Both Uber and Lyft have been subsidized in the last decade by venture capitalists and other private investors who have been willing to bet on newcomers and that their financing allowed the experiments to grow at low rates. The companies used this influx of cash to decimate the prevailing taxi industry and obtain huge amounts of market share. But as public companies, that stage of their lives ends now.
There are other enormous pressures. Hundreds of Uber drivers went on strike this week before the IPO in an effort to highlight poor pay and unsatisfactory working conditions. They argue that Uber's business model enriches the company's executives at the expense of low-paid drivers who are classified as independent contractors, making them ineligible for full-time employment benefits.
Uber distributes cash incentives to drivers to keep them on their platform, further affecting their final balance, as well as discounts for passengers. In the company's S-1, he said he increased incentives and promotions for drivers in the first quarter to maintain their competitive position in the market, and said he expects his relationships with drivers to worsen.
Uber is already raising prices in a key Market: New York. A new minimum wage law and a new "utilization rate" approved by the city forced the company to raise rates to take into account the time that drivers spend looking for passengers. Other cities are exploring ways to increase the payment for drivers, and that could mean more pressure on Uber to increase rates.
Why is this so important?
Good question! We're going to do a little reality check, okay? How many people really use Uber? Uber clients made 5.2 billion "trips" over the past year, although Uber has some nuances of how these trips count. A UberPool shared trip in which three clients share a trip but pay separately qualifies as three trips for the company. The deliveries of Uber Eats also count inside the trips.
But Uber's growth is also shrinking. This table from the Center for a Digital Future helps explain this problem. Most age groups in the US UU They report slight increases in the use of passenger transport services such as Uber and Lyft between 2016 and 2018. Only the group of 25 to 34 registered a decrease of around 0.6 percent, but it is still the most widely used demographic. to 27.3 percent. That's growth, right?
Not at all. Even for the age group that most loves these services (25-34), 72.7 percent of them do not use Uber or Lyft regularly. In that same study, 85 percent of all Americans use these services in rare ways or they do not. Uber's revenue growth is slowing year after year. And transportation network companies like Uber are only a fraction of the total number of miles traveled in the United States with less than 2 percent.
But that is changing rapidly, especially in key markets such as cities. Uber and Lyft have long argued that applications for people traveling on foot have the potential to improve cities by improving traffic and reducing ownership of personal automobiles. But there is a growing body of research that suggests that the opposite is happening.
The latest study, published last Wednesday in the journal Science Advances underlines how Uber and Lyft are responsible for 40 percent of the increase in traffic congestion in San Francisco. And a study conducted last year found that applications for people traveling by car put 2.6 miles of new vehicles on the road for every mile of personal driving eliminated, for an overall 160 percent increase in driving on the streets of the city. city.
But who cares about traffic and profitability? Uber is not completely without a driver?
Uber has not given any prediction on when it can be profitable, but some investors expect that fleets of automatic vehicles will make it possible. Driverless cars could eliminate some costs of paying drivers. But technology is still really new. And even when they are completely autonomous, Uber will still have expenses for the technology and possibly for the cars themselves.
"There is no driverless road to Uber profitability, so the arguments of S-1 are vague, if not so, inconsistent," he told Hubert Horan, a 40-year-old consultant experience in the management and regulation of transportation companies that wrote a 17-part examination of Uber's financial situation for Naked Capitalism ]. "The initial deployment of driverless cars, if it ever happens, would seriously increase Uber's costs, and S-1 clearly shows that Uber lacks the necessary capital to become an important player in this brave new world."
Do not forget that Uber was responsible for the only death caused by a self-driven car.The fatal accident in Tempe, Arizona, in March 2018 was a big setback for Uber and the entire autonomous driving industry, yet Uber is chasing cars totally without a driver, and is raising huge sums of money from the potential to deploy a giant fleet of robot taxis. automatic driving unit after obtaining a $ 1 billion investment from Japanese conglomerate SoftBank, Toyota and automotive component supplier Denso.
"The first stage for autonomy is about growth and safety," Khosrowshahi said. CNBC this morning. "So first, it has to be safe. Then, autonomy will reduce costs per mile, which, in essence, will open another stage of growth, I think. The winning time is well spent, but I think the growth is worth it. "
Calling Uber's profit on" good off "cars is a little underestimated. commercially prepared, and much less profitable, for years, if not decades.Meanwhile, Uber will continue to hemorrhage cash, propped up by cash from investors and the $ 8 billion it expects to raise through its IPO. (Khosrowshahi he called it "a very important clue".)
What's next? Should I buy these shares or what?
Uber needs to be well with cities, it will be difficult to move forward, given the company's track record of making its way into urban areas without permission, decimating the highly regulated taxi business and then asking for forgiveness later. City officials are rightly skeptical of Uber's recent peace offerings, including his offer to direct more passengers to public transport by adding metro and bus schedules, as well as the power to buy tickets. in its application.
Cities could quickly change the table in Uber through tighter regulation and tougher controls on driver's salaries, since Uber is especially vulnerable in the cities. In 2018, the company obtained 24 percent of its gross reserves from five metropolitan areas: Los Angeles, New York City and the San Francisco Bay Area in the United States; London in the United Kingdom; and São Paulo in Brazil. That's pretty incredible leverage, and it helps explain why Uber is leaning back to placate cities by backing big policy changes, such as congestion pricing and drivers' pay increases.
If the company continues to use public transport steel conductors and mistreats drivers, cities could use that leverage to put more pressure on Uber, which could affect stock prices, which could incur anger of the shareholders … you can see how this develops. , straight? Uber is immersing himself in unknown waters with his OPI today, and it seems very likely that the service we have come to know and love (or at least tolerate) will never look the same again.