
Uber posts $1B loss - nopriorarrests
https://mobile.reuters.com/article/amp/idUSKCN1NJ2YM
======
merricksb
Other discussion on the front page (with more votes/comments):

[https://news.ycombinator.com/item?id=18454254](https://news.ycombinator.com/item?id=18454254)

------
pcprincipal
I'm baffled that this company as of October is targeting a $120B IPO valuation
[1]. I'm assuming there are institutional buyers out there at this price as
the article says banks advised them on this number. It would be one thing if
the prospects for Uber converting revenue to its bottom line were great, but
margins are _shrinking_. The CEO admits "we're in a big battle" with Lyft and
more competitors are coming. Waymo will be all over the news next month [2].
IPOing in this environment - at least at a valuation 1.6x its last round [3] -
seems difficult.

[1] - [https://www.theguardian.com/technology/2018/oct/16/uber-
targ...](https://www.theguardian.com/technology/2018/oct/16/uber-
targets-120bn-valuation-2019-flotation-report)

[2] - [https://www.bloomberg.com/news/articles/2018-11-13/waymo-
to-...](https://www.bloomberg.com/news/articles/2018-11-13/waymo-to-start-
first-driverless-car-service-next-month)

[3] - [https://www.cnbc.com/2018/08/27/toyota-to-
invest-500-million...](https://www.cnbc.com/2018/08/27/toyota-to-
invest-500-million-in-uber-at-a-valuation-of-72b-wsj.html)

~~~
adjkant
An IPO, no matter the climate, is the only way anyone gets their money even
half back. If they wait, they will simply burn even more money and likely face
an even worse climate as their business model is exposed more and more as
unviable. Not that I would go near Uber with a 10 foot pole, but if I had
money in this and didn't care about anything else, IPO ASAP would be my call.

~~~
adtac
So the moment an IPO happens each investor is going to dump their stock?
That's probably a great short opportunity right?

~~~
hammock
Would have to be naked shorts. Check out Groupon's IPO.

------
CptFribble
Honest question from someone who doesn't understand high finance:

Article says $2.95b revenue. Where did all that money go? Wiki says they have
12k employees, is every single employee getting paid $300k+?

And if Uber has never been profitable, or at least not for a while, where does
the money come from? Is there really $100b+ of investor cash floating around
out there, getting spent on stuff like Uber?

~~~
eldavido
You're just missing some terminology. This stuff is surprisingly complex --
which gives technical people used to worrying about mind-numbing levels of
complexity an edge ;)

"Revenue" is confusing for business like this. More precise reporting usually
reports either "GMV" (gross marketplace value, all the payments Uber took in)
or "net revenue", which would deduct the amounts paid to drivers. If an
article said "revenue" without further qualification and it was a marketplace
business, I'd probably assume they were talking about GMV.

"Profit" is to some extent a fiction of the accounting department -- the
relevant question is actually cashflow. Money in, money out. When you need to
make a payment for loan service/payroll/etc and don't have the cash, you're
headed for bankruptcy; that's pretty easy to understand. By way of comparison,
whether or not a firm is "profitable" requires making a bunch of complicated
judgments about whether you've actually "earned" the cash you've collected
(e.g. gift cards, multi-year software contracts) and on the expense side, how
to spread the cost of large, long-term, fixed assets (like code development,
PCs, etc) against what they productively delivered (revenue-wise) over long
timescales, potentially decades. That's called depreciation and amortization
and it's a big topic in accounting school.

One thing many developers forget is that customer acquisition, especially in
marketplace businesses like Uber, DEVOURS cash. Uber spends like crazy on
everything from conventional advertising (digital, TV, radio), referral/sign-
up credits, rider incentives, cross-promotions with other brands (stay at X
hotel and get uber for 10% off), etc.

Uber is uniquely complex because it's sort of an aggregated conglomerate of a
bunch of markets with differing stages of maturity and profitability. Think of
each of these as different businesses, where the older, more developed (e.g.
Chicago, New York) ones are putting cash into the business, subsidizing the
spend (investment) on developing a good competitive position in later markets.

And yes, there is absolutely truckloads of money available if you can show you
can reliably acquire customers on a business with good economics.

~~~
sonnyblarney
Profit is not a fiction, it's just a different thing that cash flow.

Cash flows ultimately reconcile with profit. Or they should.

~~~
unreal37
It's fiction in that it can be whatever they want it to be.

Like Amazon was known for years to intentionally not make a profit. They
arranged their business so that all the money they made got plowed back into
the business in such a way that they could claim a slight loss.

That was in their control to some degree.

~~~
sonnyblarney
"It's fiction in that it can be whatever they want it to be."

No, absolutely not. There are well accepted accounting principles.

If a company wants to re-invest, then they can do that - but 'profit' is a
material, objective thing, of course it changes profit, but it also would
change 'cash flow'.

Financial accounting is a real thing, not any kind of fiction.

It gets to be fiction when there are things that are difficult to account for,
or intangible things like goodwill.

But if they book a sale on Dec 1 - then that's revenue, even if the money
doesn't come in until 3 months later.

~~~
eldavido
Yes and no.

While you're technically correct that there are well-accepted principles, they
don't always have much bearing on whether a company will be solvent, or easy
to finance.

Example 1: Amazon's core retail business. Not very "profitable". Yet, it
provides a massive amount of float through their ability to get inventory
quickly from suppliers on long payment terms (30-60 days), that's sold to
customers in something like 7-14 days with immediate collection. That means
Amazon has something like 2-6 weeks cash, at hundreds of billions/revenue per
year (8-40 billion in interest-free cash), as effectively an interest-free
loan. That might not be profitable but it's very easy to see how that allows
cheap financing of capital-intensive investment. Amazon is explicitly run with
emphasis on cashflow dynamics (less on profit). It's worked exceedingly well
for them.

Example 2: A hotel might run very profitably on a unit basis but require so
much upfront capital to finance that it's practically impossible to build.

My point isn't that accounting isn't "real". Money is also in some sense a
"shared fiction" [1] and yet it's quite real. It's just that looking merely at
accounting profit/loss doesn't really tell you much about the operational
dynamics of a company. It took me a really long time to understand this.

[1] From "Sapiens", a great book, explaining the role of fiction in real-world
decision-making and beliefs.

~~~
sonnyblarney
Yes, that's the difference between profit and cash flow, basically working
capital.

I think most people get this, this isn't really one of those magic things.

In both cases you've described 'profit' is still 'profit' in the generally
accepted sense, and we have cash flow statements to help us understand that.

------
garysahota93
This is interesting. I wonder how much money they are spending to keep ahead
of competitors and I wonder if it will, in fact, pay off in the long run. They
can't sustain a loss for long before people lose faith.

------
perpetualcrayon
At least the early investors have probably made pretty substantial exits by
now, made a nice chunk of money in record time. But at what cost? I don't
think anyone sane could argue that their growth has been organic?

