Beyoncé’s crazy in love with Uber, but why aren’t we?
By Charlotte Antoinette
Unless you’ve been living under a rock, Uber has been giving the perception of a booming business that’s an App driven taxi and food delivery service. Uber has been a private company for 10 years until, their biggest competitor Lyft went public in April leaving Uber putting all the cards on the table risking everything to go public six weeks later on the 10th of May on the New York Stock Exchange.
Going public for Uber came as a surprise to many after the company had publicly announced that they had recorded a loss of $US1.1 billion already in the first three months of 2019 therefore posing the question to investors, why would you invest?
Why become public?
Ubers plans included grabbing more of the transportation market by expanding logistics, including scooters, creating driverless vehicles and mass transit however, all these great ideas require capital, a lot of it and while also keeping up with competitors such as Lyft.
What happened in the days following the 10th of May?
The 10th of May was knowingly going to be a monumental day after Uber had already been expected to be pulling off the largest public offering in recent history.
The realisation that it would be such a big Initial Public Offering (IPO) came after last year various investment banks floated a valuation of $US120 billion however, the day came along with Uber valuing the business at $US91 billion after they had already suggested to investors that the stock would value closer to $US100 billion.
The IPO opened up with selling around 207 million public shares at $US44 to $US50 a share however they traded at 7% below the IPO price at $US42 per share and then closed at $US41.57 creating a market capitalisation of around $US76.5 billion instead of the forecasted $US90 billion. Although a very rocky start the Uber CEO explained how thrilled he was after raising capital which would be “crucial to their future growth plan.”
The various reasons to Uber’s Failing Fortune Thus Far:
1. The New York stock Exchange was down three days prior due to trade tensions that escalated between the US and China two days before they were set to go public.
2. Multiple environmental groups have used the company’s initial public offering to highlight the company’s contribution to climate change and increased carbon emissions therefore suggesting the use of electric cars.
3. Uber had already made it public that the business had total losses over the past three years to add up to $US10 billion which expectedly would scare investors in buying shares in a business in plenty of debt.
4. Uber’s image would be unattractive by ethical investors after the company was largely affected after the old CEO Travis Kalanick damaged their image by being the subject of sexual harassment allegations, covering up a computer break-in that stole personal information about its passengers and stealing self-driving technology which leads to another point.
5. In March 2019, Uber was at fault for a pedestrian’s death after one of their testing self-driving cars killed a female pedestrian in Arizona even with a backup driver behind the wheel. This created a liability risk. Multiple lawsuits could impact future profitability
6. Various Uber drivers have been accused of assaulting passengers impacting the businesses reputation.
7. Uber drivers have complained that they feel mistreated by the company as they work long hours wearing out their cars for a wage that barely allows ends to meet.
Although the business evidently has various obstacles possibly contributing to the downward pressure on the shares, analyst Alejandro Ortiz explains that Uber's story has the potential to make billions in a growing market.
Who’s bought into the risky opportunity?
Interestingly, many famous celebrities including Ashton Kutcher (who invested all the way back in 2011), Gwyneth Paltrow, Jay-Z, Olivia Munn, and Leonardo DiCaprio have bought into Uber however many are questioning whether it was done for endorsement. In contrast, Beyoncé the ‘queen of everything’ made a ‘flawless’ business deal in in 2011 after she was offered $6 million to perform for a corporate Uber event in Las Vegas she then insisted payment in equity — and now that $6 million has turned into $300 million.