Uber Part Deux

UberSource: Bloomberg

Here’s the first part on Uber’s sale pitch.

I just can’t get over this quote from Morgan Stanley’s pitch of Uber shares to their clients when addressing the lack of financial info from Uber (There’s a 290 page prospectus of just verbiages and no financial data):“the development of insights and big ideas is valuable to the investment process, whereas obsession over incremental ‘information’ flow is not.” Nice quote right. Well Uber is still raising billion despite the lack of info. A chart like the one below is probably all some investors need to make an “informed” decision.

Uber

The bankers that refused to push the Uber stocks on their clients will probably not be doing the IPO. But at the same time, this is great risk management from their part. Let’s say Uber investors starts to lose a lot of money, they might have a legal case for suing the banks for pushing the stock on them. This is the kind of stuff that got bank in troubles over and over. Just look at the financial crisis mess with the subprime mortgage bonds.

I can’t believe they can sell that stuff. How much money can Uber be losing for not disclosing their financials? This is like Trump’s taxes. There’s stuff in there he doesn’t want us to see otherwise he would have disclosed it a long time ago. If Uber is making money, they would proudly show it. Now everybody know they are in the red. Losing money is not bad thing when you are starting up since people are investing on the potential of making money in the future. The real question is will Uber will ever be profitable? Can they show a path to investors that will see a positive return in the future? Uber has been around 6-7 years and it’s still classified as a $65 billion start-up. When do you lose the tag start-up?  This is what Uber is offering: the potential of making money in the future. But maybe they can’t show that therefore we will talk about our big dream. People love investing in these new concepts. Sometime it works, like Facebook, and sometimes its a flop like Twitter. Twitter has been around longer than Uber and still hasn’t figured out how to make money.

“the development of insights and big ideas is valuable to the investment process, whereas obsession over incremental ‘information’ flow is not.”

Let’s assume you need money for a house or a project. So you go to your bank asking for the money. The banker ask you for pay slip, your budget, assets and liabilities, you know the usual stuff that would ask somebody if they were asking you for money. But instead of providing the info, you tell him about that your insights and big ideas are valuable to getting money, whereas the banker’s obsession over incremental ‘information’ flow is not.” No way in hell you are getting a dollar. They might think you have been smoking too much. But somehow you can pull that stunt with the sale of Uber shares…

Good for Uber really. If they can raise that money without putting up any financial data, good for them. Heck there are a lot of suckers out there, might not be a great shareholder base to have but they are willing to throw money at you, why not take it.

Regarding Uber’s financials and future, there’s a great piece online by the nakedcapitalism you can read here.

Article by Brian Langis

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1 Comment on "Uber Part Deux"

  1. Here is the deal with Uber – quick and simple:

    1. Uber is good for the rider – but will get worse as the quality of the drivers deteriorates, especially now that Uber offers sub-prime loans for folks with credit scores of 500-600, who will become indentured drivers to Uber. And Connecticut has just softened background checks for drivers in that state – please see http://www.courant.com/news/connecticut/hc-uber-connecticut-criminal-records-1118-20161118-story.html
    2. Uber is bad for the drivers as evidenced by the 50% annual turnover rate and the need to attract non-credit worthy drivers and drivers of questionable backgrounds as referenced above.
    3. Uber is bad for Uber because they will not be able to ever turn a profit. If they raise fares they lose customers. If they lower fares, they lose drivers at an even faster turnover rate. In the meantime, even though they have 85% of the ‘market’ compared to Lyft’s 15%, they have to compete ferociously with Lyft, which means paying driver referrals and bonuses, which is unsustainable without fare increases.
    4. Critical mass for 100% fully autonomous vehicles is at least 10 years (40 quarters) away and will require hundreds of billions of dollars of additional investment to get there. By critical mass, I mean tens of millions of vehicles in use and at a cost of travel that is less than that of car ownership. And Uber will have plenty of competitors in this space, including Google, Toyota, Nissan, BMW, Volvo, GM, Ford, Daimler, Audi, Baidu, Honda, Hyundai, PSA Groupe, and Tesla – see http://www.businessinsider.com/companies-making-driverless-cars-by-2020-2016-10/#volvo-is-aiming-to-make-its-cars-deathproof-by-2020-by-rolling-out-semi-autonomous-features-in-its-cars-eventually-working-up-to-fully-driverless-ones-6.
    5. What major successful company has endured where the customers are happy (trending to less happy), the de-facto employees are miserably exploited, current and future competition is and will be brutal, and the company is losing money hand over fist? Pretty short list, no?

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