
Uber Sinks to New Record Low as IPO Share Lockup Expires - JumpCrisscross
https://www.bloomberg.com/news/articles/2019-11-06/large-uber-block-trade-is-said-to-price-as-ipo-lockup-expires
======
ProAm
Is anyone really surprised? Years before the IPO we knew they were not
profitable in the least. We knew VC cash was subsidizing rides. We knew that
their future was purely dependent on a self-driving car fleet where they could
ditch drivers (and their pay) completely. This on top of a horrible culture
with pretty lousy ethics and morality.

This is how this was supposed to play out and everyone here (on HN) knew that.
The only people suckered were public investors during the IPO roadshow.

~~~
hodder
Sure, but the same could be said of Tesla. Horrible employer, constant exec
churn, unbelievable cash burn, what appears to be structural losses.... But
Tesla still has a 56B mcap today. Uber is 46B. These VC/equity issue cash
furnaces can go on longer than most can fathom if a subset of investors
believe in the long term vision.

~~~
deweller
Tesla has arguably a more clear path to a profitable future. Uber's path to
profitability is arguably much more speculative and dependent on risky
technology advances.

~~~
drannex
Agreed. Not only did Tesla have a clear path, but they had a product that
could sell at much higher margins, better quality control, not-so dubious
legal ways of selling them, paid their employees decent wages (Uber... does
not), and they won't have technology that can be copied and repeated by a
second year student at uni.

Uber and Tesla are not anywhere close to directly comparable.

------
chollida1
People are dumping Uber with over 79 million shares traded already. Compare
that with an average of 10 million traded daily leading up to this.

Also weigh this against the fact that Uber had a relatively small float from
its IPO compared to the shares coming free now. They had about 200 million
shares available on their IPO and 4x that coming off restriction which is a
huge ration.

They tried their best to boost their IPO at the expense of their employee's
and the results are.... well not great.

I guess the good news is that with this lock up expiring 90% of the available
Uber shares will now be available to trade so within the next week or so we'll
find out what Uber's new price equilibrium will be.

Lots of open interest on the weekly $26 puts at the moment with nothing coming
close on the call side, which indicates that not too many people expect a pop.

I guess the one silver lining is that Softbank probably won't be too active of
a seller which should help employee's jumping ship.

Will be interesting to see the staff turnover at Uber in the next 6 months.

uber just had a big block trade one at a 4% discount, this is a pretty big
discount from what a block trade would normally cross at which indicate that
the buyer expects a larger drop to occur.

So looking at their cash position, they have about $12.5B in cash wich is good
and total debt of $7.8 so lets call it $5B in cash on hand with free cash flow
estimated at -$3.8B a year, so charitably 1.5 years of cash flow remain if the
losses don't increase/decrease which isn't a very good assumption given that
the losses have accelerated from 2017 and 2018

For something positive East is about 13% of revenue and "other" is 2.3% of
revenue so they are starting to diversify their revenue, though at tremendous
cost to their profitability.

Revenue is also pretty diversified by country with the US being only 53% of
revenue which is a big accomplishment!!!

~~~
xfour
What's their cash on hand position, I believe I saw that there's 13B, after
adding 8B in the IPO, that seems like a ton of cash on hand for a business
that isn't showing any signs of turning of profit.

Could they not just without any further cash infusion continue to lose similar
amounts for the next three years and be cash solvent. Does that then not give
a big incentive to figure out how to become profitable in the near term?

~~~
pbreit
The core business is very profitable. Loss-making is happening in their less
mature product categories and expansion efforts.

~~~
chollida1
> The core business is very profitable. Loss-making is happening in their less
> mature product categories and expansion efforts.

Not really. It is true that in their non GAAP accounting they broker out
revenue by segment and showed that "Rides" made a profit of $631M but they
also include categories for eats, freight and other bets that lost money.

But the kicker is that they introduced a category called "Corporate G&A and
Platform R&D" which lost $621. If you look at this category which includes

> "Corporate G&A also includes certain shared costs such as finance,
> accounting, tax, human resources, information technology and legal costs.
> Platform R&D also includes mapping and payment technologies and support and
> development of the internal technology infrastructure. Our allocation
> methodology is periodically evaluated and may change."

SO basically they are saying Rids is profitable if you don't need to have a
business to run it, ie no lawyers, HR, execs, payment systems, cloud
infrastructure or employees to develop code.

TL/DR rids is profitable if you ignore the cost of running the Rides business
and only look at the income that it brings in, which is true for any business
that has income.

~~~
mikraig
...what's $631M - $621M?

I agree that they're losing money overall. But just the ridesharing part is
making enough profit to cover the entire Corporate G&A line item.

------
habosa
I always look for a discussion of "how much money does Uber need to make to
cover all the fundraising" and I never see anyone doing that analysis. Instead
it's just "they're not profitable" or "they turned a profit".

Uber took a few billion dollars of investor capital over the last decade.
Let's assume we live in the world from the textbooks where the value of Ubers
stock is actually the net present value of all its future earnings (hah!).
What do those earnings need to look like for the investors to turn out to be
right? As in, would they have done better investing in some other asset?

My theory for why you never see this kind of analysis is that it doesn't
matter to anyone. Nobody is trying to actually build a business that will
generate money with their investment. They're building hype machines they can
use to sell their stake to someone else before it all explodes. It's
speculation and manipulation all the way down.

~~~
cactus2093
Part of the misunderstanding, at least as I understand it, is that for a
growing company the vast majority of the expected earnings come a very long
time in the future.

Peter Thiel talks about this for Paypal in Zero to One, IIRC in 2001 their
projections showed that like 75% or more of the net present value would come
in 2011 and beyond.

I don't actually know how you make a model like that, clearly you need to
assume a maximum size and a decline at some point in the future or else you
would expect infinite future revenue? But obviously people are doing that,
amonth other types of models for Uber and deciding it's still worth $45
Billion as of today. If not the stock price wouldn't be that high. I think the
reason you don't see it is just that it's more advanced than what a regular
journalist is going to do, and I assume you're not paying for the right
specialist publications to have access to that level of reports.

If you still think it's completely crazy, then what are you waiting for get
out there and short the stock, there's free money to be made!

------
omarhaneef
So I think people may be misinterpreting this drop:

lock up expired today, so the sales today -- throughout the day -- are a
result of the lock up expiry.

This pre-market drop is the result of people anticipating the drop and selling
before the market opens.

It is also, partly, driven by the disappointing earnings from 3 days ago, and
indeed the drops over the last few days have been about as large.

For what its worth, shares are slightly up from the open.

~~~
streetcat1
The post lockup sale was already "priced" into the share price a month ago (or
even before). The market react only to NEW information.

In general, it is impossible to know what is priced in or not.

~~~
omarhaneef
By your logic, it should have been priced in at IPO, since we knew back then
that it would happen.

However, note that back then we also didn't know what else was going to
happen. We didn't know if earnings would go up or down, or a lawsuit would
emerge etc.

After earnings (a few days ago), we had a "purer" expression of the effect of
the lockup expiry.

In other words, we had the information but there was also a lot of noise at
IPO (or a month ago etc).

~~~
erikpukinskis
All timescales happen simultaneously on the market. So there is a slice of the
market that’s priced how you say: IPO plus many years. There’s another slice
that’s priced on the day’s expectations, another slice on the quarter, etc.

How big each slice is varies per company. But OP is correct that for all
slices that contain yesterday, yesterday is priced in. Which includes all
slices that were in the order book yesterday.

Some people did get out between IPO and yesterday, and they would not have
priced yesterday at IPO.

~~~
omarhaneef
I will just point out what I see as a contradiction in these statements:

If getting out of the stock after the IPO and before the lockup expiry allows
you to "escape" the effect of the lockup expiry, then you are implicitly
saying that the expiry was not priced in.

I don't know what it means for a "slice" of the market to be priced a certain
way. Uber has a clearing price which reflects all the opinions at any point in
time. What is a slice?

~~~
erikpukinskis
Basically, sort all shareholders by planned sale date. Then you can slice them
into “bins”. Let’s say we want nine $5B bins. They will each have a median
planned sale date.

Made up example numbers:

$0-$5B of market cap: plan to sell within 24h

$5-$10B: plan to sell within 30d

$10-$15B: plan to sell at the end of the quarter

etc...

For any given future event, it will only be implicated for some of those
slices. So the cost of an event will only affect that part of today’s order
book.

------
safog
From Q3 results, it sounded like the company was profitable just on ride-
sharing itself and was losing a ton of money on eats + cargo + autonomous
vehicles R&D.

I wonder what a fair valuation would be for just the ride-sharing business if
they were to spin off / shut down every other part of their business and
essentially become Lyft.

~~~
notfromhere
I wonder how much cost offloading was done to make ridesharing look profitable
and everything look like a loss. Uber needs a positive narrative of some kind

~~~
lm28469
aka Uber is selling a $5 pizza for $10 and recording $7 as "disruptive tomato
sauce" r&d.

------
granto
Some unsolicited advice for any Uber employees here on HN: You may want to
seriously consider selling all vested shares. The price not be what you are
expecting, but, from my own personal experience, and "most expert advice", it
can be better to sell and diversify. Many one-time high-fliers, such as Zynga
(where I previously worked), never got back to their IPO or lockup expiry
price.

~~~
pchristensen
I was at Groupon at IPO. IPO’d at $20. Dropped to $3.50 by the time lockup
ended. I sold because I needed the cash. 7 years later, it’s trading at $2.90.
The market isn’t perfect, but shenanigans with private company valuations are
usually worse.

Take granto’s advice.

------
blondie9x
I think Lyft and Uber hurt public transit. There has gotta be a better way to
make American cities more livable and accessible without adding additional car
traffic.

Buses, denser house, better urban planning, metro rail and subway additions
are the way we need to go like Asia and Europe. Uber and Lyft are not doing
well in Europe and Asia because leaders realize they make traffic worse and
are trying to focus on zoning and transit instead.

~~~
Andrex
> There has gotta be a better way to make American cities more livable and
> accessible without adding additional car traffic.

This problem and its solutions are not new. The solutions weren't implemented
because there wasn't enough desire to implement them, and I doubt that has
changed today.

American culture pushes the idea of personal vehicle ownership equaling
success, and if you have a car you're going to drive it instead of taking the
subway.

------
chefandy
Jeez. Maybe they should rename the company 'unter'.

On a more serious note, I'm not sad to see this. I hope companies trying to
disavow all corporate responsibility by claiming they're only responsible for
the technology behind their platform and not the effects of running the
platform the way they do is only a fad. Their stock price obviously isn't a
proper indicator of this trend bucking, but I'm glad that they, being the
poster child for this sort of foolery, aren't the apple of every tech
investor's eye anymore.

------
cfitz
I wonder if lockup agreements will ever be made illegal.

I doubt it, since they’re primarily there to ensure the original investors get
an ROI, but they sure seem to be an overall negative incentive for the general
public / retail traders to purchase stock with lockup agreements, given the
earliest they can buy is right when the IPO pops.

~~~
lmm
> I doubt it, since they’re primarily there to ensure the original investors
> get an ROI, but they sure seem to be an overall negative incentive for the
> general public / retail traders to purchase stock with lockup agreements,
> given the earliest they can buy is right when the IPO pops.

That seems slightly backwards. The lockup protects buyers in the IPO more than
sellers: it means you can be confident that the market isn't going to be
flooded tomorrow. Anyone who bought in the IPO has now had plenty of time to
get out, if they wanted to.

------
nullecksor
I was hired at Uber with the promise of 49$ a share, and boosting that it will
go up to 75 by the time of IPO. Naive me at the time didn’t research more on
it, but these were just some numbers thrown at me in 2015. I will never trust
a recruiter offering me snake oil again. That said, I left after a year and a
day, and this price makes my compensation close to less than new industry
hire.

------
bthrn
With the layoffs, the quarterly earnings, and now this, it sounds like Uber’s
having a bit of a tough time. Sentiment about the viability of Uber long term
is quite negative.

Can anybody at Uber talk about what the morale and culture is like right now?
I’ve received a job offer and I’m struggling to reconcile what I’m observing
externally with what I’m hearing from the small set of people I’ve spoken to.

~~~
citilife
Doesn't appear HN is particularly negative about Uber:

[https://hnprofile.com/compare?search=uber,lyft](https://hnprofile.com/compare?search=uber,lyft)

~~~
alextheparrot
It marked Uber having a significant loss and slow growth as positive — seems
like a bad signal based on an initial sanity check

------
hodder
A quick reminder to everyone that buying all time lows on a stock is one of
the worst equity strategies possible (statistically). Go ahead and run a
backtest.

On the flip side, buying stocks at all time highs, while counter intuitive, is
one of the best equity strategies available (with trailing stops).

Buying Uber stock here is borderline moronic until the trend turns around.

~~~
alteria
I'm curious, anywhere where I could read more about the high/low statistics?

~~~
hodder
For sure. Here are some links:

[https://www.cis.upenn.edu/~mkearns/finread/trend.pdf](https://www.cis.upenn.edu/~mkearns/finread/trend.pdf)

[https://www.bauer.uh.edu/TGeorge/papers/gh4-paper.pdf](https://www.bauer.uh.edu/TGeorge/papers/gh4-paper.pdf)

[https://mebfaber.com/2007/05/30/buying-the-highs-vs-
buying-t...](https://mebfaber.com/2007/05/30/buying-the-highs-vs-buying-the-
lows/)

[https://allocatesmartly.com/buying-global-stocks-at-all-
time...](https://allocatesmartly.com/buying-global-stocks-at-all-time-highs/)

[https://mebfaber.com/2019/11/04/is-buying-stocks-at-an-
all-t...](https://mebfaber.com/2019/11/04/is-buying-stocks-at-an-all-time-
high-a-good-idea/)

------
rb808
What surprises me is that so many tech companies issue huge amounts of RSUs
and their stock price hasn't tanked. Do people actually keep their RSUs in
their employer? I sell asap, I'm not going to be Enron'd. One day this whole
house of cards will collapse.

Would be great if anyone had some figures on how many employees sell vs keep
their RSUs.

~~~
goobynight
Which specific companies surprise you? Employees selling their RSUs is a drop
in the bucket vs the market cap.

------
tempsy
It's not moving as much as I expected given the number of shares released from
lockup.

------
smabie
A good discretionary strategy for these sort of things is to do a long
volatility options trade on the day lockups end. Either the market has
overestimated the number of shares being sold or has underestimated it. Either
way, you make money. Of course ATM options are almost always more expensive if
they expire close after the lockup period ends. But even so, in my experience,
you can make some money reliably using this signal and a little discretion.

------
sschueller
How much wealth was redistributed upwards? Who benefited from Uber other than
the founders and maybe 1% of the entire business?

I find it highly unethical for such a business to be able to ignore so many
laws most of which protect the have nots to build a system that moves most of
the profits to the haves. Then dump the broken business to IPO for fools to
buy up and loose as well.

~~~
AJ007
Riders and drivers who got subsidized rides and income, were probably the
largest beneficiaries.

Uber employees, VC partners, on the Silicon Valley side. A lot of other tech
workers have benefited from the upward price pressure exerted on developer
salaries not just in Silicon Valley but around the world.

Who got screwed, if Uber’s valuation never recovers - late stage investors,
companies doing similar things such as in food delivery.

~~~
alteria
I was a big fan of the $25 referral bonuses in the early days. Probably saved
a few hundred dollars overall.

------
meekstro
Uber is the ubiquitous word for modern transport between 1 to 40kms in the
western world. Ubering is a verb.

Thats a whole lot of mindshare and Uber is a whole lot better than a taxi.
Future demand for taxis will go up. Uber is the verb for the software layer in
the middle of getting from a to b.

Nobody can innovate enough in the space to displace Uber’s brand lead. Running
a server is cheaper than paying a dispatcher.

Like Coca cola there is an uber on every street corner of the western world
and customers love uber. Uber doesn’t need to buy syrup or warehousing.

Sounds like an opportunity to buy a profitable brand that successfully
invested in becoming a verb.

I wonder what would be the minimum support cost if you kept the brand going
and outsourced the server tech support. And what would be the minimum number
of developers required to update the app for drones and air taxis.

I reckon 100 x 250k development 2000 x 100k server support 10 x 200k design
1000 x 100k driver/customer liasion Servers don’t know say 10,000 x .5k

Equals about 400m a year in operating costs.

If they are serving more than 400m rides a year and growing that should be a
buy because every ride past 400m is pure profit and the only depreciation is
their servers which is a minuscule percentage of their costs.

I’m going to read up on this company. It’s lower risk than Tesla because it
only requires labour and the demand for getting from a to b is only going to
increase. Lyft will never be a verb. Its definitely worth further
investigation. I hope the shares sink further.

~~~
RantyDave
Hoovering is a verb, it didn't help them.

Edit: Xeroxing.

~~~
meekstro
Hoovering and is a verb in the US from technically advanced hardware
businesses while ubering is a verb globally from a taxi software company.

So uber doesn’t have

Depreciating factories, Competing manufacturers, Supply chains Software R&D

And has expertise in establishing brand prescence and marketshare.

Uber = better taxi and demand for taxis will increase in future with or
without driverless cars.

How easy is it for car manufacturers or software companies to build and
displace what Uber has in operation in the transition to driverless cars? I
think it’s difficult.

Uber seems to have deep experience how this market will play out and they are
actually spending the money on r&d to see how it will play out and should be
able to position the Uber brand which everyone in the Western world associates
with taxi to clip the ticket on an increasing number of taxi rides in the
future.

Google and Apple are possibly the biggest threats but they have a whole lot of
anti-trust, privacy and motivation issues to overcome. Possibly Tesla has a
automotive technology edge but unlikely and Tesla is constrained by its
capital intensive business model.

From a net cash flow perspective, clipping tickets on taxi rides seems a
profitable growth business while R&D into driverless car tech is a bottomless
well but if your the largest taxi ticketer in the world it’s probably good to
be at the edge of this field of knowledge.

At $26.00 a share uber needs to clip $1.00 per ride on 2.4 billion trips to
get 12* earnings.

It did 10 billion rides/deliveries in 2018 and has 12 billion cash on hand
presently.

It is a software business and owns the copyright to it’s software stack so
should have lower operating costs than it’s smaller competitors licensing bits
and pieces of their stack plus economies of scale plus one focus on getting
people and things from a to b as easily as possible.

I hope it goes lower. At 26.00 - 7.00 for the cash on hand you are paying
19.00 for a verb that sells 6 tickets per day at $1.00 profit per ticket
equals a 30% return on the core business which is being invested into R&D to
secure brand prescence and network effects in emerging delivery technology.

That R&D can stop today and Uber will continue to print and clip the ticket
for 10 billion rides per year now and for the forseeable future.

So it’s just a question of whether the current manager is a genius at
deploying capital into the driverless r&d space and can get dominant market
share of air taxi’s and delivery because the core of Uber (10 billion tickets
per year) is a fantastic business and that definitely didn’t happen by
accident and with antitrust regulations the uber app should become more
profitable and dominant.

I hope it goes lower.

------
svara
Slightly tangential: Does anyone know how Uber was able to skirt Taxi
regulation in the US? Did they actively lobby, or fight this in the courts?
It's something that I've always been curious about, since this was a big
problem for them in several European countries, and it's hard for me to
imagine that in the US everybody just bought the "it's totally not a taxi"
argument.

------
mxschumacher
I'm not sure whether to interpret Uber's branching out into many different
verticals (flying taxis, autonomy, food delivery, general logistics, scooters,
payment etc) as an act of desperation or genius.

Generally, I'm fond of focus

~~~
Ididntdothis
I feel they have too much money so they desperately try to branch out. Google
is a Little similar. A ton of cool experiments but almost nothing turns into a
real business.

------
ganitarashid
It’s funny how Uber simultaneously says it’s all about supporting drivers and
treating them like family, and at the same time they want to fire them all so
that robots can do the driving.

So which way is it?

~~~
Barrin92
it depends on whether you're trying to swindle regulators or investors, so it
varies day by day.

------
buboard
Time to buy the dip

~~~
lm28469
What about buying stocks in companies trying to have a positive impact on the
world and not managed by megalomaniacs ?

~~~
buboard
Like?

~~~
lm28469
Any company supporting what you truly believe is good for this world instead
of dumping $$$ with the sole purpose of making $$$ no matter the external
costs. Sustainability, energy, education, medicine, the small business at the
corner of your street &c. the world isn't running out of good companies.

~~~
buboard
i actually agree to that but companies are not available in the public market.
Uber does provide _some_ value for people but it's mostly a gambling game
pumped by a temporary wave in economies. i think it s time for some serious
work in biotech.

------
joshe
a

~~~
tempsy
Uber moved from stock options to RSUs in December 2014. People who got RSUs
are OK. Those that got options in late 2014 are probably the worst off but
unsure what the strike price was for those.

------
trhway
an acquaintance got recently hired to do CRUD there for half a mil total
yearly. Sweet. And all that while making the world a better place, and
sticking it to Saudis(Softbank) whose money seems to be the source of the
compensation. I'm green with envy.

------
dangxiaopin
I am long on Uber: taxis are dead, it will not go anywhere. The only problem
is that the board made a strategic mistake that felt good short term. They
tried to retain users by pushing the founder out, and hiring a diversity CEO.
This failed long term as any populist board move does. But they still have a
chance to have their NeXT moment and bring Travis back.

~~~
jdcaron
You are long on the new transportation model for taxi like rides but is Uber
the right horse to bet on? I personally think not.

~~~
ajross
At the current share price, no, it's probably not. It's the weak version of
WeWork. The company is wildly overvalued based on growth expectations it can't
possibly meet after a history of investor-driven mania. But the business model
is solid. Pervasive gig-sourced drivers across the world with a universal
interface is absolutely what the market wants.

Uber the company may be in trouble, but Uber the _brand_ will be driving
people around for decades to come.

I still wouldn't buy them right now, though.

