
Uber Said to Raise $1.6 Billion in Convertible Debt to Expand - applecore
http://www.bloomberg.com/news/2015-01-21/uber-said-to-raise-1-6-billion-in-convertible-debt-to-expand.html
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applecore
Notably, this fundraising round is with Goldman Sachs' private wealth
management clients, which sets the stage for Uber to go public in the next few
years. (Goldman Sachs tried and ultimately withdrew a similar deal in 2011 for
their private clients in the United States to invest in Facebook. Of course,
this was prior to the enactment of the JOBS act.)

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elberto34
That's the way you get rich. Make apps, social networking..stuff like that. Or
invest in already-successful, viral app companies like Uber, Snapchat, Tinder,
etc. Why anyone would go the brick and mortar route is beyond me. I would
rather invest $100k in successful web 2.0 companies (like the ones I listed)
and double my money in 6 months than start a crappy regular business which has
a 50% chance within five years of totally failing and taking all my money with
it. Like the Dire Straits Song Money for Nothing, except it's apps and web 2.0
instead of music.

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cylinder
I know far more people who are making lots of money doing traditional, un-sexy
businesses, and I can't think of anyone I know personally making money with
apps, web2.0 etc.

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elberto34
but regular business takes work and risk of total loss of capital. I can
double my money buying Snapchat and then do nothing but watch TV and eat
Cheetos for the next 6 months as VCs bid it into the stratosphere

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ghshephard
As many, many, many people have discovered - investing in startups has as
great a risk of losing all your capital (actually, a much greater risk) than
investing in a bricks and mortar - the major difference is that there is also
a much greater chance of huge returns.

The reality is only 1 in 100 people are likely capable of building a great
startup (in the PG sense of "Startup") that succeeds - but there is a huge
part of the population that can build out a brick and mortar traditional
company.

To put things into perspective, On the App Store, about 3,000 of the 1mm or so
apps are capable of supporting a developer in the United states with the
Median US Income ($53,800/year).

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outside1234
What am I misunderstanding about Uber's business model where it needs lots of
capital to expand? It seems like it is just a middleman and doesn't need any
capital assets to expand into a geography - what am I missing?

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untog
It needs to sell itself to drivers, for one. Manage drivers. Advertise...

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gaius
Raising a ton of VC and spending it on banner ads is _sooooo_ 90s.

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minimax
[https://www.uber.com/jobs/list](https://www.uber.com/jobs/list)

I count 680 open positions in 145 unique locations posted there. Pretty
impressive.

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Animats
"Convertible debt" \- what a gimmick.

 _The bond Uber placed with Goldman Sachs’ private clients is a six-year bond
that will convert into equity at a 20 percent to 30 percent discount to Uber’s
valuation at the time of an initial public offering. ... The convertible bond
carries a coupon that increases over time if Uber hasn’t gone public within 4
years._

The distinction between debt and equity is diminishing. Traditionally, debt
has no upside, and in exchange, creditors are paid ahead of equity holders in
bankruptcy. Convertible debt is secured debt if things goes bad, and equity if
things go well. So, no matter what happens, convertible debt holders are at
the head of the line.

They even get to deduct the interest paid up to the conversion. Then it's a
long term capital gain. This is an argument for ending the deductibility of
interest.

The question is, if Uber is so great, why do they need to raise so much cash?
It's not an inherently expensive business to run. They don't hire the drivers
or buy the cars. Uber is just an app, a scheduling back end, and a marketing
operation. Is it that the original funders want to cash out?

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shubik
> Traditionally, debt has no upside

Not really--if interest rates decline (either in the overall economy or if a
bond's issuer is seen as becoming less risky), the value of a bond will go up.
The 10 Year US Treasury bond increased by over 10% last year, for example.

Also I agree with you about ending the deductibility of interest (for other
reasons as well), but I'm not sure why you say the distinction between debt
and equity is diminishing--convertible debt has been around for a long time.

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threeseed
Smart move. If I were Uber I would be trying to siphon as much cash as
possible from investors before the company starts hitting its inevitable
roadblocks.

The fact is that government regulators will end up banning Uber in most
countries. You can't continue to operate outside the law flouting vital safety
regulations that protect the interests of consumers for long.

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cylinder
Doubt it. Eventually, even in the US, they will adopt the New York model -
require TLC licensed drivers, cars, etc. but not medallions. Basically
black/limo cars. That's the way it should be IMO, I don't think Uber should
have full discretion in deciding who gets to pick up passengers. The ratings
system is really a small part of Uber and can't be relied upon to filter out
bad/dangerous drivers.

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threeseed
Sorry I should have clarified: UberX is the problem. It is already being
banned in more and more countries as governments come to terms with the
regulatory changes required.

And whilst Uber is popular in the US outside it still isn't a well known brand
and what they do know is the questionable behaviour of its management team
(there have been media reports). So I don't see them disrupting taxi services
around the world to the same extent as the US.

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chappi42
\+ more uber jobs \- less taxi jobs

What's the point for an European city to change regulation?

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nandemo
Because the numbers aren't the same.

In a given year, the number of taxi jobs is pretty much fixed. The number of
Uber (or generally, non-regulated) drivers is not.

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markvdb
They need the money to grow their global network. They can afford to fight the
regulators that are in the pocket of entrenched taxi businesses in the short
to medium term.

In the not-so-far future, that resistance will be broken by the introduction
of the robotaxi. Ueber will be spearheading that one. Too capital intensive
for the current "big" taxi companies in the medium term. Too automated for the
regulators to defend the taxi drivers working conditions.

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adevine
I hear this a lot, but, given what I've read recently about the true state of
self-driving cars, I think the "robocars as a replacement for taxis
(especially in cities, Uber's main market)" is a REALLY long ways off, i.e a
generation or more.

That is, it seems to me like the places fully self-driving cars will initially
be most successful is places where access is limited or "messiness" is
minimized - places like highways, where you could even have "self-driving car
only" lanes - a huge boons for long commutes. In cities, though, there are a
lot of Really Hard Problems, that from what I've read engineers are not even
close to being able to solve, things like:

1\. Following detour signs 2\. Following a street cop when they are
contradicting stoplights or other road rules. 3\. Dealing with construction
signs in traffic, like when a construction worker has those signs they flip
back and forth between "stop" and "go" (or heck, they just drop the sign and
wave you by). 4\. Knowing the difference between stopped traffic where you
should wait (i.e. traffic is just really slow) or move around (i.e. someone is
unloading).

That is, it seems like the state-of-the-art will allow self-driving ASSISTED
vehicles in the pretty near future, but completely self-driving vehicles, that
can handle all the complex, messy urban situations that people can, is not on
the near horizon.

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sushid
I can understand where you're coming from, but that's also failing to realize
that there are technical workarounds to the problems you've presented.
Regulatory measures will be key in making these transitions smooth (and AFAIK,
lawmakers have been proactively involved).

Things like standardized signs for cars to process and construction workers to
hold would already solve 3/4 of the problems you've already mentioned.

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adevine
I can buy the regulatory measures in certain areas, which is why I mentioned
the highway. I find it very difficult to believe that these kind of
regulations would be adhered to, 100% of the time, in the chaos of a busy
urban center.

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curiously
can someone explain what happens when a company IPO vs being acquired? Which
is more favorable?

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EC1
Maybe they can invest in teaching their drivers how to _drive_ and learn the
city. I've had nothing but AWFUL experiences with Uber. Always having to coach
suburban drivers around the city like lost fucking cattle. 1 star every single
time.

Invest in customer service. There has to be a way to train people to be better
drivers.

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threeseed
You mean people who are driving as a side job and are completely unregulated
are bad drivers ?

I am shocked.

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faragon
Uber will collapse, in my opinion. How much time will take for many others
doing the same? Come on. Such investment is just nonsense.

