Assuming the compensation was for a business need (like hiring labour or purchasing something necessary) then I don't see how that should be isolated or differentiated from regular costs of running the business - assuming it wasn't a business need (and was more of a way to game the stock price) then I'd assume whoever made the decision to take such an action when Uber is already losing money hand-over-fist is just trying to get out some loot while they can... which is potentially an even more extremely bad scenario to accept.
First, the 3.9B figure appears to represents all RSUs vested up to this point, aka many years worth ("(2) Q2 2019 includes $3.9 billion of stock-based compensation expenses, primarily due to RSU expense recognition in connection with our initial public offering"). That's why its slightly misleading - its many years worth of stock comp for employees which is all getting recognized this quarter (Happens in pretty much all the big tech IPOs)
In general though, its very reasonable to associate that as an expense, which is why GAAP requires it. Where that gets complicated is that its not an immediate cash expense to the company, hence some fudging around with non-GAAP accounting which is seen by some companies.
I am pretty personally wary of stock based compensation in non-publicly traded companies since it's a gamble that the employee is accepting that is entirely controlled by the company - bad business decisions can cut your compensation through no fault of your own if the company goes bankrupt.
I'm not sure when the accounting laws changed to include SBC (probably post-financial crisis), but it's weird to include it in an income statement as if it was a cash expense. You can find articles from accounting experts arguing both ways if you are curious.
More to the OPs point, I'm guessing Uber had FB-style RSUs that don't settle until an IPO or Change of Control. I'm not sure how this all gets accounted for, but given the recent IPO, it sounds like they booked a very large SBC charge this quarter to account for the immediate hit of all the previously issued RSUs finally being settled.
Going forward, the number of RSUs that settle each quarter would therefore presumably not be nearly as large.
But I'm not an accountant so the above may be wrong.
There isn't much to disagree about. It's a real cost against shareholders (that's what Buffett is talking about) and it is not an expense against the business operations such that it depletes your cash or harms cash flow (the point a parent comment was making).
Putting it broadly, stock compensation is primarily a hit against existing shareholder ownership. It debases their ownership of present or future profits.
Uber could simultaneously produce $5 billion in positive cash flow from operations and issue $20 billion in stock every year to employees. They'd have a profitable business at the operational level and be drowning shareholders in dilution.
Except it is, you're borrowing money from the future if your company would ever consider issuing more stock in a followup round - it also may damage your ability to court private investors, not just because you lowered your share price but because you're more likely to dilute it more in the future.
The stock market is a generally viewed today as an absurd concept composed of abstract financial wizardry - but it is grounded in the concept of partial ownership in a company and the assets of that company.
But mostly post dot-bomb. It's one of the reasons you see a lot of RSUs at bigger companies today rather than traditional options. FAS 123(r) was the first major rule. This came about because companies basically were treating stock options like they were free money from an accounting perspective.
One time loss is fine to ignore, but one should still look at the remaining 1.3 billion loss including routine stock based compensation.
>We incurred operating losses of $4.0 billion and $3.0 billion in the years ended December 31, 2017 and 2018, and as of December 31, 2018, we had an accumulated deficit of $7.9 billion.
Now they have accumulated a deficit of $13.1B. You might say, well they shrank their loss from $4B to 3B to $1.3B (giving you the extra $3.9B one-time stock comp). Except one has to keep in mind they cut expenses and raised fees in that stretch in anticipation of their IPO, so its literally the best they could do...only lose $13.1B over 3 years.
Investors and Founders made their money, Uber is now for the plebs to figure out how to salvage and milk. It will just be a long and painful death from hereon out, but the market will remain irrational to allow Investors to save face so they can run the same Startup/IPO unicorn scam on the public to cash out.
However, instead of the long painful death, an alternative now that the Investors are out, we may see the regulators finally "catch up" and properly classify Uber drivers as employees not independent contracts and the bottom give out.
(Self driving cars were never going to save them. Not only do they not work yet, there's no reason to think they'd be much cheaper for years to come. Uber would have to pay for them, garage them, maintain them, operate control centers, etc. They'd be in the car rental business, which is not hugely profitable. Uber's business model is to dump their operating costs on their drivers. With self driving cars, they couldn't do that.)
Apparently Lyft upped its guidance, and Uber stock took off today; it was up 8.25% percent from yesterday. As of right now, it's now down 10% off closing to 38.66, a value it hasn't had since... last Wednesday morning.
Disappointing if you're a holder, sure, but not as catastrophic as you'd think if you only read this news.
(To the extent I have bias here, it is bias against trying to judge stock performance only by reading about its massive jumps up or down. Uber I'm not a particular fan of but I can't say I'm all that personally passionately against it either. I don't mean this as attack or defense, only a perspective on the news that I think is closer to a truth.)
Most people who drive drunk aren't doing it because they're desperate and have no other option, they're doing it because they're drunk assholes. They will still do it even when they could get a Lyft for $8. They're drunk.
> I couldn't even imagine trying to get home without lyft or uber in many circumstances.
Ok, but people must have managed it somehow 10 years ago, right? Your college and your city have not changed very much in that time. It truly is not that hard to take turns with your friends staying sober once in a while, or just stay over at a friend's place and then leave in the morning.
My college and the city actually has changed a lot in the past 10 years, it's seen acceptance rates go down 20%, 2 deaths in Greek life, tuition rise by $10,000, and major companies move into the area. My school also has developed a parking shortage, so many students living on campus are not allowed to bring cars. Uber/Lyft is a godsend for many students.
My point is that it's a marginal improvement, and there are so many downsides. In my city, 8% of cars on the road are Ubers and Lyfts, and half of them are just drivers cruising around looking for passengers.  That's terrible for traffic, terrible for the environment, and terrible for anyone who wants to bike through a square without a clueless Uber swerving into them to drop someone off.
Also, the backstop of Uber makes it much less likely for people to push for real sustainable public transport. In 5 years, when Uber is dead or so expensive that most people won't use it regularly, we're going to look around and wonder why the buses and trains seem to have stagnated for 15 years. It's a tough sell to shut down a few streets to expand a subway line right now when that disrupts all this essential Uber traffic.
Finally, think about the opportunity cost. The hundreds of billions of dollars that could have gone to real infrastructure , or startups that aren't going to fire all of their definitely-not-employees in a couple years.
 https://drive.google.com/file/d/1FIUskVkj9lsAnWJQ6kLhAhNoVLj..., https://www.citylab.com/transportation/2019/08/uber-lyft-tra...
It's kind of ironic, at my school we have a great (all electric!) bus system transporting people around campus, and half the time when the bus pulls up to the cutlet, there's an uber there either waiting or dropping off a passenger. Which then slows down the bus while it honks at the clueless driver who doesn't even know there's a bus stop there.
1,740 Cost of revenue
864 Operations and support
638 General and administrative
Also: what’s in “Cost of revenue”? It is neither “Operations and Support” nor “General and Administrative”. The subsidies they give drivers? If it is, prices would have to go up by about 50% for that to go to zero.
What really surprises me is how many otherwise savvy and tech-knowledgeable people bought into the hype.
That said, I also think that not everyone involved in spreading the hype does it for innocent reasons. For example, people often criticize Elon Musk for making absurd claims about self-driving cars, but then argue that he does it because he is innocently deluded. I suspect it's more likely that he is lying through his teeth.
1. General AI optimism fueled by the almost incredibly fast rate of advance of progress enabled by supervised learning in certain domains and by reinforcement learning in an even narrower set of domains.
2. Adding to the above, progress enabled by super-precise mapping within constrained areas.
3. Probably some California-centrism. What's this weather thing of which you speak?
4. Silicon Valley techno-optimism that problems just need one more version to solve
5. A great big game of topper in which, once various people started proclaiming that self-driving was just around the corner for whatever combination of over-optimism and because it was in their financial interest to do so, YOU had to fall in line or you'd be perceived as being hopelessly behind your competitors when you said self-driving was decades out.
Further fueled by
6. The many young professional urbanites with no current interest in owning a car or even getting a driver's license who so desperately wanted to believe that their personal robotic chauffeur that they believed things that they never would have were they not otherwise so personally invested.
The are not trying to attract drivers at all, they are trying to eliminate them. The drivers portion of the fair is the largest cost so removing drivers increases margins overall. Self driving cars are the only way this is a good business - which is why there is so much competition from many of the smartest innovators/investors in the world.
The P/S multiple is what you’d expect the P/E multiple to be.
Ridestar claims that 61% goes to the driver; 39% to Lyft/Uber.
Their S-1 shows lots of sales and marketing, lots of R&D (remember, they're working on self-driving cars, among other things), and lots of general/admin (I suspect they spend a lot on legal).
I don't have a horse in this race, but if Uber/Lyft fail there are going to be substantial societal repercussions. Admit it or not, they have disrupted the transportation industry significantly.
Just as a note: without a low-cost private car, I literally could not keep my job.
So whoever gives me a discount I will use and if no one will I will catch a bus or taxi. Google Maps shows me the estimated cost for Uber and Bolt.
I don't want to work around it. Therefore, I rarely use these services. It is becoming more and more hassle.
Do you understand how many other industries use AI for pricing? What about buying things on Amazon? Hotels? Airline tickets? Gas?
You may as well go back to using taxis if you don't think Uber is giving you a fair price.
I'm okay with airlines, amazon or whoever setting pricing at whatever they want as long as all users pay the same amount for the same thing.
It may as well be trying to hold back the sea. They can do this in the short-term, but not forever.
ninjaedit: I'm in favor of this putting pressure on public transit for sure though. In SF its abhorrent how late/delayed MUNI can be...
I still think there's a market out there, but Uber in particular feels like it's grown too big for the actual market it can hope to occupy.
You can see the losses shrunk (lets for just a second ignore the stock based compensation because that should have been something every investor of Uber should have known was coming) but missing on top line revenue is pretty rough.
This makes a bigger difference when big drops come into play. A 50% gain is offset by a 33% loss.
City dwellers posting the opposite because they rely on the product to make their lives work.
Here I am, stuck in the middle with you.
What were they expecting to happen? A company losing money with no sign of being profitable any time soon. If ever. They expected the stock to go up?
Not exactly as bad as the headline makes it sound, but still bad. EDIT: Still very bad. Obviously!
From January: "According to a new poll conducted by the Pew Research Center, just 36 percent of American adults say they have used ride-hailing services. Sixty-one percent say they have heard of the services but hadn’t taken a ride."
Heck. I travel lots and it's probably been a few months since I've taken a Lyft or Uber.
I don't think it's as important a company as you seem to think.
It's not as though UBER going under is going to tank the economy, but it will be a major unicorn going under, causing the entire silicon valley money-losing model to be questioned, leading to trouble raising money, layoffs which drag down the rest of the economy.
Similar to the 2000 crash.
Not great for devs looking for 6 figure jobs in the Bay Area. But not clear how broad the effect would be--unless they were triggered by more serious external events.
And 2000 crash also was associated with other things like 9/11 so it's easy to conflate.
Several unicorns going bust could be enough to kill confidence in the markets and cause people to prepare for the worst (I.e. sell investments and stop spending).
Just a hypothesis!
1. 3.9 Bil was a one time cost
2. 1.3 Bil is not almost double 880 Mil. I mean that's just egregious.
That doesn't mean it isn't a loss?
Does that mean I didn't lose your $20?
Did you lose $20?
That's a closer analogy to SBC than losing cash.
Do you owe me $20?
This is the closest to what SBC is.
If the options are exercised, you're liable for that expense. It's a delay on the payment of the 20 dollars helping cash flow, and tax code yadda yadda, but you can't pretend that handing out vouchers for money to employees doesn't mean you're not liable for the money from an outsider assessing your financials.