I'm basing that opinion on what I've seen in my city. When Uber and Lyft left Austin, there were lots of alternatives that had existed or popped up to fill the space.
Aside from brand recognition, what does Uber have that the others don't?
I tried to use one or two of those alternatives. Setup was a pain and I ended up taking a cab. I have at least one coworker who couldn't get a ride because he was in South Austin.
Additionally. if your company is only in one city, visitors have to know about, install, and setup a new app just so they can use you; it's just as easy for them to take a cab. Last time I needed a ride in DC, I used the Lyft app that was already on my phone. There was no friction in being in a different city.
Maybe there was a local alternative in DC, but who's going to look up local ride sharing companies and install yet another app when the app they already use at home already works? Even hailing a cab is easier than installing a new app for one or two rides while you're in a new city.
Uber and Lyft have network effects.
Regarding your second point whenever I travel internationally one of the first things I do before traveling is to search for rideshare <cityName> on the internet. Whatever pops up I just download that app and set up my payment before I even get there so I can seamlessly hail rides. Often there is a thread on TripAdvisor waiting for me that compares the options.
I hadn't expected to be in DC--My connecting flight was cancelled, so I needed a ride to the bus station. But I think if it had been planned, I would have Googled "is Lyft in DC?" and seen that I was all set.
Maybe I could save a few bucks by installing an alternative service, but it wasn't worth it to me to bother. (On the other hand, my price insensitivity is largely because I only take a Lyft/Uber about six times a year, so they might lose heavy users more quickly.)
I couldn't tell you what car sharing service any of my friends use.
When I was in Malta earlier this year, there was no Uber. I downloaded an app called Taxify while sitting at a cafe, and called a car from it. It's not a huge barrier to download and install another app, even when trying to call a car.
It doesn't matter if you know who uses it. It only matters that there are. People are more willing to drive for it if there are plenty of users. If there are more drivers, there's more likely to be one nearby when you request a ride, so service is better. Better service makes for more riders. More riders makes it more worthwhile to be a driver. Positive feedback loop based on network size = network effect.
> I downloaded an app called Taxify while sitting at a cafe, and called a car from it. It's not a huge barrier to download and install another app, even when trying to call a car.
You know what's even less of a barrier? Not having to download and install another app.
Maybe it's not a huge barrier to you, but you're a single data point. You're talking to a second data point that's telling you that if I have a ride-hailing app on my phone that works, I will choose it before I install another app, every time.
My belief is that most people will take the path of least resistance, just like I do. How confident are you that they won't?
Investing in it is basically a hail-mary that we'll get fully autonomous vehicles within the next couple of years, and even in that best-case scenario Uber would be a strong-but-not-world-eating company (the traffic problems would still exist, and operating costs would skyrocket in the short-term before they go down). I can't fathom how it's worth nearly $10 billion dollars. I almost want to short it.
Well then you'll really not fathom how it's worth $80 Billion. Which is it's actual market cap.
Uber is worth more than Ford and GM combined.
I haven't used a cab app. Are the taxi apps similar to Uber and Lyft's where it identifies the car and driver and you can track the location of that car on a map? Do drivers and passengers rate each other?
The only major difference with the taxi apps is that the drivers are first party instead of third party so the companies have a perverse incentive to trust their drivers more than the riders. Of course, the more competition you have the less of this behavior you see.
Versus having to find, download, and set up a new app for every new city... maybe on roaming data or dodgy airport WiFi... when you've just flown in...
Brand recognition is no small thing. Hyper growth is what a lot of companies are going for, because that's the model that lead to amazon dominating the world. Ubering being a verb is very valuable.
One of those leads to massive profit (eventually), and we'll see what happens with Uber.
Uber is bullish, maybe that's why?
With such a high burn rate, what are they going to do? From everything I read they're not like Amazon where they can just "turn on" monetization unless they're going to hike up their prices.
So, why would anyone invest in this stock long term? What am I missing?
It will just be a rather simple yet massive capital investment to put those cars on the streets, something that large, traditional companies with their far better financing terms will easily dominate.
Then you have two businesses; you manufacture cars to sell to people and you have a service arm that handles an Uber / Taxi like service with driverless cars.
I assume that's what any company like this does eventually once they've captured enough of the market.
Does Uber have enough market to hike their prices yet? Will it before it runs out of money? If they're IPOing I feel like they have to think they can do this, I just don't get the how.
You can shear a sheep many times, but skin them only once.
The Uber employees now have access to the public markets to sell their stock options. Quite possibly, they had an option to sell at $45 a few weeks ago for the IPO.
Perhaps some employees "lost out" now that the price has dropped, but that's the breaks. Sometimes IPOs "pop", sometimes they "fall". But its strictly superior to have a market to sell your shares, rather than no market at all.
What is your notion of "fair" and how do you go from there and arrive at that value? I mean, if the people who financed the project didn't invested a penny then the company would not have the means to get people to actually do the project.
their customer base will be richer//business people ready to pay higher sustainable prices for rides.
A 5-year short.....maybe? Will be interesting to see what the short interest and borrowing rate will be.
When you accept equity, you accept risk. I don't think that there's a terribly bright future for Uber, but the stock hasn't been a catastrophe so far, and all the other big stocks will have disappointing times too.
On Uber's side, they sold at their $45 mark. However, seems this may have been a down round vs their last private funding round ($74.1BN pre-money vs $76BN last year).
It's generally an optics play - how bad would it look if you as a bank, who wanted to continue to offer IPOs, listed a company and its stock price plummeted below IPO on the first day - obviously you didn't do a great job at valuing the company and building an adequate order book.
But let’s also assume some large proportion of players are reactionary, tending to sell when the price drops and buy more when the price rises. If you could show a sufficient demand at price A, then that large block of people would not sell their holdings because the price does not decline beyond A.
Then, the economically rational actors have a dilemma because they believe the price should be B (where B < A), but powerful actors have shown it is unlikely to drop below A for all practical transaction volumes... it may make more sense to treat the true price as A.
I guess what I’m asking is how much money relative to market cap is required to make the market accept an inflated price _without_ actually trading on it and losing money?
I myself am bearish but sitting this one out because I have no idea what to make of it. One thing I know though, calling it disappointing 1 hour after open during a tightning range is beyond irresponsible. It´s flat out stupid and lacks any understanding of how markets work. The stock could literally pop bull 5 mins from now, or not. Either way I wish people would stop with this sensationalism.
Observing that there is no predictable "signal" in stock price changes only proves that whatever you're using to make predictions is unable to beat the market (the "efficient market hypothesis").
Stock prices are very obviously not completely random, in that they tend towards $0 when companies go bankrupt.
There is some randomness, or at least unpredictability, in stock prices. This is called "volatility". But the model operates on the very small tick-to-tick scale, not wether UBER is priced at $45 or $450.
"Stocks were down today due to a sell-off"
Absolute cock and bull nonsense.
Stock drops 2% at open:
"Markets are falling because tariffs are 100% bearish signal. Sell it all!"
Stock rebounds 2% a minute later:
"Markets are up because tariffs can't stop the American economy."
The employees are part of the 72 billion. All employees (current or ex) have a lock up period after the IPO where they are not allowed to sell.
* This is common in IPOs or other events (eg leading up to earnings announcements). The thinking is that if everybody dumped the stock at once, it'd depress the price. It's also common to prevent insider trading. There are a lot of employees who are probably waiting nervously for the blackout period to expire.
Put is still a bad word because it has a connotation for options trading. (put options vs call options).
Maybe "to bet on a short position" is the best phrasing? "Put", "Call", and "Cover" all have precise meanings in the financial word. "Bet" is ambiguous enough that its kinda clear in this case.
Eh, nevermind, IPOs don't have options chains yet...
Uber will need to become more profitable so they will raise their prices and the users will be the ones who suffer from this IPO
What the fuck is this?
It's a mini cab firm with an app. Mini cab firms existed before Uber.
Yes, yes, I know. This kind of thinking would have me not investing in an Amazon back in the day because they weren't profitable... but they weren't also losing almost as much as they were making in revenue either... and were actually selling a tangible good to prove out a business plan of basically world domination... so yeah I'm happy with my shares of Zoom.
Uber had actually something to win as you said because of all the free cash floating around and the fact that Uber is completely out of China.
An IPO is basically a way for the company to raise money, but tis time straight from the public. Usually when it gets harder and harder for them to attract private investors. The IPO listing basically guarantees that they won't take the public's billions and run.
Successful companies with perfect cash flows (think of Github, Valve, IKEA) always try to remain private. Because they have nothing to gain by raising more money. They can give their employees good bonuses and maintain control of the company.
This is by design. In Silicon Valley we are obsessed with them because they are the only meaningful exit for common employees (take the money and run mentality). The rest of the world doesn't care much because they see them for what they are.
Of course. Startup employees do not know they can sell their 'private' stock already, today. However, they need permissions to do so from the company's board (their answer will be NO. Here, saved you from asking. Or maybe they will offer to buy back the stock with shitty terms), and can only sell them to an accredited investor and not random people/public.
Many companies would be ran better if they remained private (think of Facebook, which now has investor pressure to increase the price, which results in careless decisions about data handling, privacy etc).
You are making a mistaken assumption that only unprofitable companies need to fundraise, there are lots of profitable companies that want to raise capital to fund future growth (and their current cash flows aren’t enough).
Also I am very surprised that you named Github as a well run private company. As far I know, they were definitely not profitable (their spend was crazy) which is part of the reason the board took the acquisition offer from Microsoft. I really don’t think they are a good example of a well run private company.
You are correct that only companies that want capital IPO but that is by definition as an IPO is a capital raise. I believe that direct listing is an exception to this.
My assumption was that troubled ones also need it. So we should not be surprised that see so many controversial IPO listings recently.
Arguably, the reason IPOs happen less now than 20 years ago is because of the increase in regulatory requirements (particularly in the US), and the increase in available funding is a result of that.
Define significant. I see softbank throwing billions at tech companies.
IPOs seem serve as an `exit` for private investors who bought in while the company was private?
An IPO without raising new capital would make it more difficult to answer what every buyer should ask: "why are they so eager to sell?" It's a variation of plausible deniability.
>think of Facebook, which now has investor pressure to increase the price, which results in careless decisions about data handling, privacy etc
Trying to frame FB as a "bunch good kids under pressure" is a monumental mistake. Data has always been their business, selling ads and don't giving two shits about security is part of their DNA
> This is because of Facebook's dual-class share structure. Class B shares have 10 times the voting power of class A shares, and it just so happens that Zuckerberg owns more than 75% of class B stock. It means he has more than half of the voting power at Facebook.
This doesn’t follow at all. Zuck still has control and they were careless before being public. I would suggest being public is the only thing that puts them in the spotlight for their shitty practices.
I hear you, but...
Meh, they say invest in companies who make products you use. I use the shit out of Uber and I don't plan on stopping even if the price goes up a bit. Now, I'm upper middle class, and I understand this isn't everyone's mindset, so I have no idea how the rest of the world feels.
However, there are locatios, like my crappy hometown where I grew up not so fortunate circumstances, where hailing a cab simply wasn't an option. If you want to have fun at a bar, you're driving home drunk.
Bottom line, I believe in this product and I only see it growing in importance - regardless of who is at the helm. That's my gut feel, and that's why I bought in a little today.
Just like taking investor money at anytime it can be a way to get extra cash to continue to build the company quickly.
The IPO system is wonky and there are bad examples but I don't think your rule makes sense.
Silicon Valley is obsessed with them because it's the only place where hundreds or thousands of employees are given significant equity; many of them have $100k - $1 million in vested equity 1-3 years into the job. You don't want that frozen in a private company indefinitely. You want liquidity to use it and to diversify your holdings. This doesn't mean you think the company will fail and you just want to "take the money and run".
A company can be profitable and still need more working capital to expand.
That being said, I don't know what to make of Uber, Lyft and WeWork (future) IPO's yet, but I am highly skeptical
Case in point, when you cash flow positive and idealy profitable even banks would happily finance your expansions. So unless as a company you want to be growing really fast, I don't see the added benefit of an IPO other than cash flow issues. Add too that the increased scrutiny by the authorities and I d prefer to be private.
Of course the same argument could be made the other way round.
And there is the rub. Uber and lyft both loose money on every ride. Their whole strategy was to dominate sweeping markeshare by subsidizing rides, then cutting costs significantly with an autonomous network of driverless cars. AFAIK uber already failed in the second half, so there really is no plan right now with what to do with these massive expensive networks of drivers that both companies are now beholden to, other than shovel more money into the furnace and hope the lights stay on long enough for driverless cars to appear through a competitor who'd be willing to let uber use their tech. Even then I don't see margins being anything but razor thin.
I'd be polishing my resume if I worked at either of these companies.