
Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares - itbeho
https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-quarter-loss-is-said-to-widen-to-1-46-billion
======
JumpCrisscross
Uber had $6.6bn on hand at the end of June [1]. That means they are down to
$5.1bn.

Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank
injects $1bn, that could only mean a few months’ runway. A large fine in the
Waymo case [2] could literally bankrupt them.

[1] [https://venturebeat.com/2017/08/23/uber-is-still-burning-
cas...](https://venturebeat.com/2017/08/23/uber-is-still-burning-cash-at-a-
rate-of-2-billion-a-year/)

[2] [https://mobile.nytimes.com/2017/11/29/business/waymo-uber-
tr...](https://mobile.nytimes.com/2017/11/29/business/waymo-uber-
trial.html?referer=https://news.ycombinator.com/)

~~~
ProAm
Honestly if they need to make money, they can lay off a ton of staff, and
license their logistics software to a lot of companies. It wouldn't be what
their game plan has been, definitely a severe pivot but they would be a money
printing machine for years to come.

~~~
andrewem
Their revenues are in the billions per year, and so their investors would be
looking for new revenues in the billions. The assumption that there's an
untapped multi-billion dollar market for logistics software that they could
quickly dominate - quickly enough to avoid running out of money - seems
unwarranted.

~~~
bwilliams18
There's an enormous opportunity in UberEATS if they can get the unit economics
right. They could also retreat into already profitable markets .

~~~
rtpg
I've used UberEATS a couple times, but after figuring out that it's basically
impossible for delivery people to make much real money off of it I feel really
bad.

Not sure if the unit economics can ever work out.

------
chollida1
Better source, and one that the article references:

[https://www.bloomberg.com/news/articles/2017-11-29/uber-s-
th...](https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-
quarter-loss-is-said-to-widen-to-1-46-billion)

At this point, two things are clear to me:

1) Uber will IPO, there's just oo much money and influence behind it to stop
that.

2) I'd be really worried if I was an employee about my options and also about
my job.

Employee's now ahve two large worries hanging over their heads.....

What about my job and what about my options...

With Uber preparing for an IPO, they'll od what most companies do, clean up
their balance sheet. And with the losses piling up they'll start cutting
costs, which as for most tech companies starts with employee's.

And now I don't htink anyone believes that they'll IPO at anywhere close to
the 60+ Billion valuation they had a year ago.

Infact SNAP looks like a great model to study for what an Uber IPO might look
like, lots of good first day to week action with price rises but then a steady
stream of down days leading up to their first quarter report which will almost
certainly show them loosing money and then much larger short interest leading
up to a huge lock up expiry of their employee's options.

Given how much money institutional investors put into the company, and the
late stage at when they did and given how much they valued the company at, I'd
be very afraid if I was an option holding employee at just how many shares are
going to flood the market before I get to try and redeem my own options.

And to top it all off, the biggest thing driving their valuation recently,
self driving cars, appears to be in serious jeopardy, can anyone make a
credible case of Uber having self driving fleet in the next 5 years?

 __EDIT __to those of you who i confused with layoffs. No one is saying that
Uber needs to be profitable when they go public, but their burn rate had
better be decreasing. T

hey don't need to fire 3 billion dollars worth of salary, no one would think
that's a wise move, but they had better show they are moving towards
profitability, and the easiest way to show this is a string of quarter where
their quarterly loss is decreasing and the easiest way to do that is to cut
costs and the largest cost is people.

~~~
__sha3d2
> And to top it all off, the biggest thing driving their valuation recently,
> self driving cars, appears to be in serious jeopardy, can anyone make a
> credible case of Uber having self driving fleet in the next 5 years?

Uber currently sends teams to major cities all over the world to build maps
for self driving cars. They outfit cars in those cities with 6 figure camera
rigs and enable 'passive collection', where maps are built over the course of
normal rides. After that they actively collect any missing pieces and move on
to the next city. They've got teams in C / D level cities (which I won't name
because I don't want to ID anyone but are the international equivalents of a
Baltimore MD or Miami FL).

They are not positioned as well as say Tesla IMO but they also aren't just
sitting around waiting for something to happen on this front.

~~~
Judgmentality
And if those maps were built with illegally obtained lidar technology (or just
if the judge thinks _they might have been_ ), they become fruit of the
poisonous tree.

~~~
ErikVandeWater
I thought fruit of the poisonous tree was only relevant in evidence
collection:
[https://en.wikipedia.org/wiki/Fruit_of_the_poisonous_tree](https://en.wikipedia.org/wiki/Fruit_of_the_poisonous_tree)

------
albertgoeswoof
It is strange that private investors are willing to fund my discounted travel.

~~~
StevePerkins
I seriously don't understand the endgame here.

Apparently, it WOULD BE possible to completely kill off the legacy taxi
industry given 10 years or so of artificially subsidized pricing. So I
understand the concept of disrupting a previous oligarchy, replacing it with a
new monopoly, and then profiting through rent seeking.

But where are the barriers to entry that would allow Uber to solidify as that
new monopoly? There's already Lyft today... and once Uber starts to charge
their true costs, then we'll likely see numerous other competitors emerge to
compete on price. Ultimately, they're _just a phone app_! Most Uber drivers
today are running the Uber app and Lyft app side by side anyway.

The usual playbook calls for the early leader to pay off politicians, and have
them write new laws or regulations that raise the barrier to entry for future
competitors. But Uber's playbook has been to take an antagonistic stance
toward politicians, rather than buying them off. So what's to stop some newer
competitor from beating them on price... or some huge company to swoop in
after Uber establishes the market, and beat them by cross-promoting and
leveraging their other lines of business?

~~~
sjm-lbm
I honestly think the original vision was something similar to Amazon: bleed
money when they are an online bookstore, make it all back when they swing for
the fences and go for replacing all of retail. Likewise, Uber might lose money
as a taxi service, but the idea would be to make it back in self-driving tech
that replaces all transportation with 5 lanes of self-driving Ubers zipping
about in all directions.

The problem is that 2017 seems like a major hiccup in this vision. The
original visionary is gone. There's been some issues with self-driving
technology. Lyft wasn't a huge problem when they were small and had no self-
driving tech, now they are much bigger and have a viable self-driving tech
partner in Ford... and so on.

It'll be interesting to see if this is actually the case, and, if they are off
track enough, how they might change the way they operate.

~~~
xorcist
It doesn't make sense. If the endgame for Uber is self driving cars they'd
have much longer runway if they were a startup doing only that, instead of
bleeding money on both ends. They were originally an app company from the time
when an app gave you easy access to capital. It's more likely the self driving
thing was something they had to do to keep the high valuation as a tech
company. It was probably an easy pick since it's something in vogue not too
far from their normal business.

~~~
fpisfun
It's also something that would potentially kill their initial business so they
had no choice I think but to go into it

------
TsomArp
I am sorry, but I don-t understand why they lose so much money. They take 30 %
of all trips, they don-t have cars, they don-t pay salaries to drivers. Is it
the infrastructure so expensive?

~~~
potatolicious
In many markets they pay drivers more than they make on each ride -
significantly more.

It happens in various forms, but I suspect minimum-payout subsidies are one of
the main causes.

In many cities Uber is trying to shorten wait times (so there's a car very
close to you always), and the only way to do this is to flood the streets with
drivers. Flooding the streets with drivers lowers each driver's earning
ability, since there are now more drivers competing for the same number of
passengers.

To make sure drivers don't quit, Uber has been in the habit of guaranteeing
payouts - if you work this area during a particular time period, they
guarantee you a minimum level of earnings, paying you the difference if there
aren't enough passengers.

This is a big part of how they lose money - in order to maintain a system
where a car is always nearby, they need to pay drivers a lot more than they
make from the passengers.

------
thisisit
> as the ride-hailing leader struggled to fend off competition, legal
> challenges and _regulatory scrutiny_

A good read on this topic calling these business _Regulatory Entrepreneurship_
:

[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741987](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741987)

------
ianai
Anecdotally, Uber seems to have a large foot print. If it were to fail I
wonder how much the economy would be affected? Ie would it start an end of
much of the sharing economy - and thus trigger some market corrections?

~~~
delecti
I suspect there are enough competitors (Lyft, Eat24, etc) that would pick up
the slack almost immediately.

~~~
rimliu
And I am sure most places have local competition. In my city there were at
least three companies doing the same before Uber even showed up.

------
ilamont
What's to stop Uber from slowing the burn via an increase in base prices?
People would still use Uber as long as it's A) more convenient than other
transportation B) better quality rides than cabs and C) just a little cheaper
than cabs.

There are surely other forms of revenue they can spin up too, but this seems
to be pretty straightforward, especially in markets where they have already
decimated local taxi firms.

~~~
misun78
Increased competition. Lyft is burning through money at an unprecedented rate
to catch up with Uber given that they smell blood this year and investors ala
Google are willing to subsidize the burn. At some point, this has to stop but
2017 does not seem to be the year.

Source: Lyft pushes back profitability after increased burn -
[https://techcrunch.com/2017/11/14/unpacking-lyfts-
projected-...](https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-
financials/)

~~~
blhack
>Increased competition.

Maybe I'm weird, but:

1) I don't even look at what the price of lyft is. So they could up the price
by a significant percentage I wouldn't even notice.

2) Even if Uber was more expensive than lyft, I would almost definitely still
take uber.

~~~
misun78
You're not weird and this is precisely why Uber is still the market leader.
But there is a cohort, in some specific areas where Lyft's network is on par
with Uber's such that price, and more specifically targeted discounts, do play
a part. Lyft can analyze which one of its riders has not taken a ride in a
while (and is hence presumably using Uber) and target them with discounts.

~~~
pishpash
Lyft just can't shake the ... downmarket vibe.

------
everdev
Is this abnormal given their size? I remember similar articles about Facebook,
Twitter and others.

~~~
_jal
It certainly allows recycling jokes from 2000. "They may be losing money on
every sale, but they'll make it up on volume."

~~~
mark-r
That joke is a _lot_ older than that.

------
Animats
OK, a down round at last. "The sale of those shares would value the business
at $48 billion, a 30 percent discount to the last private valuation."

I'll bet that gets trimmed even more if the deal closes. Losses are
increasing, not decreasing.

------
code4tee
And of course given how things have been going for them in the courts this
week all signs point to a massive hit in the Waymo lawsuit.

They still don’t have a real business (a company kept on life support by
constant external cash injections is not a real business).

------
creator_lol
Very relevant here: [http://www.businessinsider.com/australian-fund-manager-
calls...](http://www.businessinsider.com/australian-fund-manager-calls-uber-a-
ponzi-scheme-2017-5)

------
mtremsal
Uber has raised more than $11B over the years. Does anyone know how much of
that is left and what their runway is?

edit: runway to IPO I meant

~~~
apocalyptic0n3
Apparently they are at about $5.1B cash-on-hand, not including the potential
$1B SoftBank investment. So they have about a year of runway right now.

~~~
alpha_squared
> So they have about a year of runway right now.

I think that assumes their burn rate will not increase. Which, historically,
is not the case. At their current increase of burn, assuming it is linear,
they're probably looking at less than a year. Maybe even as little as 9
months.

------
lordnacho
How much of it operating the part everyone is familiar with, vs investment
into the self-driving cars and other expenses?

------
bob_theslob646
> Uber Technologies Inc.’s net loss widened to $1.46 billion in the third
> quarter, according to people with knowledge of the matter, as the ride-
> hailing leader struggled to fend off competition, legal challenges and
> regulatory scrutiny.

"according to people with knowledge of the matter.."

How is reporting like this legal? Is this not speculation?

It baffles me that no fact checking/ benchmarking exists for such a major news
platform.

~~~
mratzloff
It's strange to me that you assume that just because sources aren't named in
public that no fact checking occurred.

As far as legality, there is a system in place; if it's false, it's handled in
civil court.

~~~
bob_theslob646
>It's strange to me that you assume that just because sources aren't named in
public that no fact checking occurred.

It's hard to take things seriously when people/organizations do not take/put
skin in the game.

From a risk perspective it is genuis, but from a readers perspective it is
problematic in my opinion.( I am not a fan of gossip)

What's stranger to me is how you assume that they fact check....

For all I know they do, but it defeats the purpose of confidentiality
agreements if sources speak up when they are explicitly told not too. (I am
referring to confidential finance contracts)

