Leigh Drogen, Estimize: See How Traders are Finding Ways to Bet on Uber
by Harvest Exchange
Editor’s note: This is not a value oriented write-up, but it is a great analysis and we thought it would be of interest to readers, whether or not they invest in VC or use Uber, check it out below.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Avis Budget Group Inc. (NASDAQ:CAR) is the second largest publicly traded rental car company in the United States and the one which acquired car sharing company Zipcar in March 2014 for around $500 million.
Uber’s fundraising attracts investors
After raising $1.2 billion in funding and garnering a massive $17 billion premoney valuation, Uber may be one of the most attractive companies out there for would be investors.
Unfortunately though, Uber shares are out of reach for most as the on demand car sharing app remains a privately held company. But that isn’t stopping traders from finding other ways to make bets on Uber’s success.
One way to bet on Uber is by betting against the taxi industry it aims to dethrone. Medallion Financial Corp (NASDAQ:TAXI) is a company that specializes in financing loans used to purchase taxi medallions, which can cost up to a million bucks a piece in a place like New York CIty. Uber is trying to make those taxi licenses worthless by creating its own private fleet of drivers and bypassing the medallion system entirely. Since the start of 2014 the short interest of TAXI shares has increased 244% from 382,730 to 1,316,359 shares and the TAXI stock price has fallen 17%. The chart below from Estimize shows that Medallion Financial has had slowly but steadily declining earnings over the past 2 years.
Uber is one of several apps leading the vanguard of the sharing economy. The sharing economy, also known as collaborative consumption, is the socioeconomic model in which a pool of individuals all benefit from gaining access to physical assets without actually needing to own the underlying assets, which are often prohibitively expensive. Property rights are still clearly defined in collaborative consumption models. A renter only pays an asset holder for temporary use of the desired good, typically at a time when the owner would not be using the asset anyway, resulting in a more efficient allocation of the asset pool.
Up until recently, matching a potential passenger with a driver looking to make a few bucks was nearly impossible logistically on a large scale. Smartphones apps like Uber and Airbnb have made the process simple by acting as mobile accessible hubs for the efficient allocation of these resource pools.
See How Traders are Finding Ways to Bet on Uber full article on – Harvest