Why is Uber losing so much money? (1 Viewer)

[Snickers]

1.5B loss in Q3

https://www2.staffingindustry.com/site/Editorial/Daily-News/Uber-s-losses-increase-to-almost-1.5-billion-in-the-third-quarter-Bloomberg-44285

 

[Da Guru]

1.5B loss in Q3

https://www2.staffingindustry.com/site/Editorial/Daily-News/Uber-s-losses-increase-to-almost-1.5-billion-in-the-third-quarter-Bloomberg-44285

I don`t get it either.  All they do is administrate  correct? They don`t own the fleet.

 

[[icon]]

Marketing expenses? Legal Expenses? Top Heavy Executives? Artificially low pricing to kill competitors in war of attrition? 

Not sure... 

 

[sbonomo]

I have seen the model (we were part of a 1.5bn bank revolver). I will walk you all through it later today.

 

[Leroy Hoard]

In my area the local crackheads will drive you there for half the cost.

 

[Snickers]

I have seen the model (we were part of a 1.5bn bank revolver). I will walk you all through it later today.

 Very interested to hear

 

[eoMMan]

Costs money to settle all those sexual harassment suits.

 

[Slapdash]

Because Lyft has been a better service and doesn't have the stigma of Uber's former management

 

[TLEF316]

Because they're not really trying to make money. They're spending whatever they need to in order to acquire customers and expand to new markets to increase the $$$$ for when they eventually go public or sell to someone.

 

[The General]

Because Lyft has been a better service and doesn't have the stigma of Uber's former management

I like Uber's service better than Lyft.

Not sure how it is to work for them and they definitely have bad PR going on.

 

[Snickers]

Because they're not really trying to make money. They're spending whatever they need to in order to acquire customers and expand to new markets to increase the $$$$ for when they eventually go public or sell to someone.

Seems like a risky bet and they are trending in the wrong direction relative to losses. They lost 2.6B for all of 2016, lost 700M in Q1 this year and more than double that in Q3. They better hope that self-driving cars don't hit a snag.

 

[Phil Elliott]

Paying off hackers?

 

[Brunell4MVP]

Private start ups rarely care as much about profit as they do valuation.  The VCs and execs care about how much their investment is worth in stock and that equals revenues.

I don't know a thing about the VCs with a financial interest in Uber.  But I do remember the CEO made like $2.5m in 2014, $9m in 2015, and $96m in 2016.  Now, assume that same level of increase if you are an investor.

They will likely get profit under better control before they IPO.

 

[Snickers]

Private start ups rarely care as much about profit as they do valuation.  The VCs and execs care about how much their investment is worth in stock and that equals revenues.

I don't know a thing about the VCs with a financial interest in Uber.  But I do remember the CEO made like $2.5m in 2014, $9m in 2015, and $96m in 2016.  Now, assume that same level of increase if you are an investor.

They will likely get profit under better control before they IPO.

Perhaps but they are trending in the wrong direction in terms of profit. Amazon lost money for a while but never at this level. 

 

[culdeus]

So in Dallas you can do this wild ### thing.  $6 fee gets you $5.99 rides anywhere in town.  If you go over a mileage limit they make it $6.99.

I was out a car for a week, it cost me about 13 bucks a day in fares.  There is no possible way the cost was anywhere under that.  Based on what I can tell drivers get a flat rate of about .99 a mile and some stipends for meeting quotas on distance.  By that math Uber ate perhaps as much as 100 bucks in losses just in one week on me.  

It costs me about .50 a mile all told to drive around, at that flat rate I was seeing somewhere in the .25-.30 a mile.  If I was smart I would have just kept riding Uber.

Normal fares around here are about 1.15 a mile.  Yellow cab is 1.80

 

[EYLive]

Because Lyft has been a better service and doesn't have the stigma of Uber's former management

I'm strictly a Lyft customer because of uber's horrible corporate culture.

 

[dschuler]

Because they're not really trying to make money. They're spending whatever they need to in order to acquire customers and expand to new markets to increase the $$$$ for when they eventually go public or sell to someone.

this is very common for companies at their stage.  

 

[culdeus]

this is very common for companies at their stage.  

Late stage capitalism at its finest. 

 

[sbonomo]

Okay, i was hoping to have more time to go through the specifics but i will  have to give you the cliff notes.  Long story short is that they make a ton of  money in the US.  While they invest significant amounts in new markets in the form of discounted fares and inflated payouts to drivers eventually they revert back to the mean and screw the drivers and riders.  If you were to look at the US alone they make a ton of money. 

Now their international plays specifically in Europe and China have not gotten to a matured state where existing markets support new markets that they enter.  It is basically the same model as the US just bigger and with varying success.  One thing Uber has shown is that it will not quit regardless how much it cost them (China is an example where the continue to throw money into it even though they are losing).  The model i saw is over two years old at this point so some of this may have changed since then but overall this is how the losses add up.  Regardless of how much they are, this is still a great business that will eventually be the size of the tech giants.  Happy to answer any specific questions anyone may have.  

ps - Banks could not sign up quick enough for the revolver due to the opportunity of underwriting the IPO.  This asset is a disaster from a banks perspective (they were given an investment grade deal without being anywhere near an investment grade company yet).  Honestly, it was a PIA.  

 

[sbonomo]

Because they're not really trying to make money. They're spending whatever they need to in order to acquire customers and expand to new markets to increase the $$$$ for when they eventually go public or sell to someone.

In a nut shell this is right.

 

[Johnny Rock]

Plus show no profits = no taxes.

 

[culdeus]

Okay, i was hoping to have more time to go through the specifics but i will  have to give you the cliff notes.  Long story short is that they make a ton of  money in the US.  While they invest significant amounts in new markets in the form of discounted fares and inflated payouts to drivers eventually they revert back to the mean and screw the drivers and riders.  If you were to look at the US alone they make a ton of money. 

Now their international plays specifically in Europe and China have not gotten to a matured state where existing markets support new markets that they enter.  It is basically the same model as the US just bigger and with varying success.  One thing Uber has shown is that it will not quit regardless how much it cost them (China is an example where the continue to throw money into it even though they are losing).  The model i saw is over two years old at this point so some of this may have changed since then but overall this is how the losses add up.  Regardless of how much they are, this is still a great business that will eventually be the size of the tech giants.  Happy to answer any specific questions anyone may have.  

ps - Banks could not sign up quick enough for the revolver due to the opportunity of underwriting the IPO.  This asset is a disaster from a banks perspective (they were given an investment grade deal without being anywhere near an investment grade company yet).  Honestly, it was a PIA.  

They only wanted to get in line for underwriting?  How much are they on the hook for if this thing burns up?

 

[TLEF316]

Yeah I'd heard they were absolutely taking a bath in China. But they just keep throwing money at the problem because it's obviously a massive market and there is (or was? I thought I read somewhere that their competition was bought out) a strong local competitor that kept them from taking over.

 

[sbonomo]

They only wanted to get in line for underwriting?  How much are they on the hook for if this thing burns up?

The bank deal was a very small part of the capital structure (1.5bn).  They don't use the facility at all it was put in place to start establishing the relationships once they do go public.  The VC's will want to cash out at come point (actually they should have earlier) so they will go public.  It will be interesting to see who ultimately gets the IPO work.  We were a lead right on the deal (this wasn't in my book but my counterpart told me all about it).  Everyone is jockeying to get the lead left position.  Fees on this will be in-line with FB.

 

[Snickers]

Okay, i was hoping to have more time to go through the specifics but i will  have to give you the cliff notes.  Long story short is that they make a ton of  money in the US.  While they invest significant amounts in new markets in the form of discounted fares and inflated payouts to drivers eventually they revert back to the mean and screw the drivers and riders.  If you were to look at the US alone they make a ton of money. 

Now their international plays specifically in Europe and China have not gotten to a matured state where existing markets support new markets that they enter.  It is basically the same model as the US just bigger and with varying success.  One thing Uber has shown is that it will not quit regardless how much it cost them (China is an example where the continue to throw money into it even though they are losing).  The model i saw is over two years old at this point so some of this may have changed since then but overall this is how the losses add up.  Regardless of how much they are, this is still a great business that will eventually be the size of the tech giants.  Happy to answer any specific questions anyone may have.  

ps - Banks could not sign up quick enough for the revolver due to the opportunity of underwriting the IPO.  This asset is a disaster from a banks perspective (they were given an investment grade deal without being anywhere near an investment grade company yet).  Honestly, it was a PIA.  

Thanks, I'm surprised they are turning a big profit in the US as I've read articles claiming that drivers are killing their margins which is why they want to transition to self-driving cars.

I conceptually get the model but the amount of money they are losing is staggering and trending in the wrong direction. The amount of international investment gives me pause as well but what the #### do I know.

 

[sbonomo]

Yeah I'd heard they were absolutely taking a bath in China. But they just keep throwing money at the problem because it's obviously a massive market and there is (or was? I thought I read somewhere that their competition was bought out) a strong local competitor that kept them from taking over.

There is a Chinese based competitor plus the Chinese government that is just killing them.  They have thrown billions at it and i still believe they are losing.  They need to be careful, Lyft is starting to take market share from them as well.  Lyft is now very well capitalized so i should be interesting 3-5 years.  

 

[sbonomo]

Thanks, I'm surprised they are turning a big profit in the US as I've read articles claiming that drivers are killing their margins which is why they want to transition to self-driving cars.

I conceptually get the model but the amount of money they are losing is staggering and trending in the wrong direction. The amount of international investment gives me pause as well but what the #### do I know.

Honestly they make money hand over fist in the US.  Eventually this company will be worth $250-$300bn.  The last valuation I saw was $50bn ish.  Not sure what it is today.