Uber: Your opportunity to lose money has arrived

For everyone that gets wow'd by phone apps and buzzword like "innovation" and "disruption", this is the news that you've been waiting for.

Two days after Lyft submitted paperwork to the U.S. Securities and Exchange Commission for an early 2019 initial public offering, Uber has done the same, per The Wall Street Journal.

The company filed confidentially for an IPO on Friday, marking the beginning of a race for the two ride-hailing giants to the stock markets.

Uber’s most recent private market valuation was a whopping $72 billion, though the nearly 10-year-old business reportedly expects Wall Street to value it at as much as $120 billion in what will easily be one of the most highly-anticipated IPOs of the decade.

That would be real impressive if it wasn't for the lack of profitability of Uber.
Silicon Valley is better at generating hype than profits.

Uber's losses ticked up to nearly $1 billion during the third quarter and annualized growth is continuing to slow, according to the private company's self-reported financials for Q3.
...
Adjusted net loss widened in the third quarter to $939 million; it was $680 million in Q2.
Adjusted EBITDA loss for Q3 came in at $527 million, which is down 13 percent year over year, but up 24 percent since Q2.
Gross cash on hand decreased to $6.55 billion, down from $7.3 billion at the end of Q2.

Losing money isn't a new thing for Uber.
Uber registered $4.5 billion of losses in 2017, lost another $2.8 Billion in 2016, and another $2 Billion in 2015.
Those are Billions, with a B.
No company has ever burned cash like this. Ever.
And there is no reason to believe that things will turn around soon.

But, but, but — you may say — Uber has established a large business in cities over the world. Yes, it’s easy to get a lot of traffic by selling at a discount. Uber is subsidizing ride costs. Across all its businesses, Uber was providing services at only roughly 74 percent of their cost in its last quarter. Uber was selling its services at only roughly 64 percent of their cost in 2017, with a GAAP profit margin of negative 57 percent. As a reference point, in its worst four quarters, Amazon lost $1.4 billion on $2.8 billion in sales, for a negative margin of 50 percent. Amazon reacted by firing over 15 percent of its workers.

Uber defenders might argue that that’s a big improvement from 2015, when revenues only covered 43 percent of costs, and the GAAP margin was negative 132 percent. But as we’ll discuss in more detail, this reduction in how much Uber spends to get each average dollar of revenue didn’t come from improved efficiency, but was due to almost entirely to cutting driver pay. The transportation company appears to have hit the limit of how much it can squeeze drivers, since churn has increased.

You can bet that there are thousands of suckers eager to throw their cash into this money pit.

If you are looking for a different place to throw your cash away, Lyft only lost $688 million last year, and lost 41 cents on every dollar of revenue it generated in the first half of this year.

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Bisbonian's picture

Airline stocks.

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"I’m a human being, first and foremost, and as such I’m for whoever and whatever benefits humanity as a whole.” —Malcolm X

thanatokephaloides's picture

@Bisbonian

Nah, my money is on the old reliable stand-by's,

Airline stocks.

And there's always Bitcoin...... Wink

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"US govt/military = bad. Russian govt/military = bad. Any politician wanting power = bad. Anyone wielding power = bad." --Shahryar

"All power corrupts absolutely!" -- thanatokephaloides

edg's picture

@thanatokephaloides

Take a large fortune and invest it in Bitcoin.

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@Bisbonian It used to be utilities were a safe bet for growth and dividends, slow, but reliable.

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dfarrah

edg's picture

@dfarrah

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@edg 'used to be.'

I couldn't tell if the poster was snarking, what with all the airline problems (also since deregulation, is that correct?), but I guess Southwest might be a good investment.

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dfarrah

edg's picture

@dfarrah

knowing Bisbonian, it was snark.

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Bisbonian's picture

@edg

I DO have money in airline stock, whether I want to or not. Wink

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"I’m a human being, first and foremost, and as such I’m for whoever and whatever benefits humanity as a whole.” —Malcolm X

divineorder's picture

and discovered that the local taxi company had closed up shop. Now only Uber and Lyft.

Keep getting ride discount offers from Lyft.

We don't use these types of services often but do from time to time.

Where will the losses end. And how many small businesses and workers will get chewed up and spit out in the meantime.

Wonder what impact this will have?

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A truth of the nuclear age/climate change: we can no longer have endless war and survive on this planet. Oh sh*t.

@divineorder

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.

dystopian's picture

Uber and Lyft have put lots of cabbies and cab companies out, and made the rest of the pros have to work longer and harder for less. Because every one of the oh so cool gig economy rides is subsidized by some magic money. They don't have the same types of insurance, training, licensing, experience, and have bypassed all regulation, screwing their own drivers on the way. The cab companies were fabric of the community. And now often no choice. Sad.

Know how to make a small fortune with Uber? Start with a large fortune.

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We cannot solve our problems with the same thinking we used when we created them.
Look deep into nature, and then you will understand everything better.
both - Albert Einstein

@dystopian get direct government funding?

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dfarrah

Bollox Ref's picture

of not using Uber

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Gëzuar!!
from a reasonably stable genius.

a violation of trade law. It's called "dumping". To do so in restraint of trade is an anti-trust violation. Guess that simply is no longer enforced against $80-120 billion predators.

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@leveymg I didn't know it was illegal. They even have a name for this...it's called buying market-share. It's a great way to put a competitive business under or to buy them. As long as you have a bigger bankroll than your competitor than you can go for it.

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GreatLakeSailor's picture

if you work really hard, next month I'll double it!

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Compensated Spokes Model for Big Poor.

Lily O Lady's picture

on Uber as well as collecting six years of back sales tax.

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"The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

edg's picture

As more autonomous vehicles hit the road, Uber and Lyft will either fire all their human drivers or they'll be forced out of business.

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Deja's picture

@edg
Ever, because I'm a control freak and prefer to be the one in control of the vehicle. It's bad enough when I'm a passenger while another human drives. I also work in IT, and know how things get overlooked or not even thought about by programmers until something simply doesn't work at all, or goes horribly wrong. Simply observing the way a cell phone can go all wonky for no apparent reason, like rebooting itself, screams at me that driverless cars are a very, very bad idea. It'll still happen, but I'll likely be walking or staying put provided I'm alive when it does.

I mentioned something similar a few years back on that other site, and a smartass chimed in with 'but autopilot, don't you fly?' Not much, and won't ever again when they ditch the pilots and co-pilots, especially for take off and landing. And they will, eventually.

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edg's picture

@Deja

I've been programming for more than 40 years, producing millions of lines of bug-free code. Well, not really. As anyone that's ever programmed knows, there's no such thing. Even if your own code is flawless, the operating system, or other code yours interacts with, or a piece of hardware will gladly step up and punch your code in the face.

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Deja's picture

@edg
What could possibly go wrong with a random reboot of a driverless car, or forced update, while it's traveling 60 mph (or even 30 mph) down the road? Lightening strike? Flash flood? (We already have "power" locks and windows that stop working when wet, but those windshield wipers and headlights work fine under water, at least for a while that I've seen in flood coverage in Houston.)

That's not even mentioning the hackability, i.e. the govt/cops. Or what happens to the other motorists when either a malfunction or forced shutdown occurs. Good God, they could stop all motor travel with one command. Ack, no thanks!

Kudos for being the type of person it takes to be a programmer. I succeeded in writing code that was pretty on a screen, but never worked for shit! Second class to make me cry out of sheer frustration lol. My brain just doesn't work that way.

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Bisbonian's picture

@Deja , and my primary function seems to be to baby-sit the autopilot. I still have a copilot; his job is to look for dents on the outside of the airplane where baggage carts and lav trucks ran into it (last week it was a deicing truck). But word around the office is that the copilot is on the way out...to be replaced by a dog. The dog will be trained to bite me if I touch any of the controls.

They would get rid of me all together, but somebody needs to feed the dog.

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"I’m a human being, first and foremost, and as such I’m for whoever and whatever benefits humanity as a whole.” —Malcolm X