Uber Joins Lyft in Race to Tap Investors(wsj.com)
wsj.com
Uber Joins Lyft in Race to Tap Investors
https://www.wsj.com/articles/uber-lays-groundwork-for-ipo-1544231655
138 comments
I’ve turned around a little on Uber and Lyft.
At first I thought Lyft was doomed because of network effect.
Then I thought they were both doomed because Tesla, Waymo et al will just do an end-run around them with self-driving cars.
Then I thought maybe Uber would survive, if they can develop their own self driving tech.
But now I think, self driving tech will be a market of its own... there will always be a carmaker/software co wiling to sell vehicles and computers to someone with deep pockets.
So that brings me back to Lyft and Uber both being viable strategically.
Under that lens though, Uber looks a little weird with all of its debt and erratic behavior.
Both of them are acquisition targets for anyone who survives the EV/autonomous vehicle production wars.
At first I thought Lyft was doomed because of network effect.
Then I thought they were both doomed because Tesla, Waymo et al will just do an end-run around them with self-driving cars.
Then I thought maybe Uber would survive, if they can develop their own self driving tech.
But now I think, self driving tech will be a market of its own... there will always be a carmaker/software co wiling to sell vehicles and computers to someone with deep pockets.
So that brings me back to Lyft and Uber both being viable strategically.
Under that lens though, Uber looks a little weird with all of its debt and erratic behavior.
Both of them are acquisition targets for anyone who survives the EV/autonomous vehicle production wars.
For those saying this IPO is happening now due to market slowdown, Uber's CEO has been speaking of a 2019 IPO for a while[1]. I am not an investment banker, to me this seems far more pre-planned than a last minute rush before a heavy correction, no?
For those who do know the space well, how far ahead would one be able to plan to time this right to happen to coincide with the current trends in the market?
[1] https://www.wsj.com/articles/new-uber-ceo-says-company-could... , Aug 30, 2017
For those who do know the space well, how far ahead would one be able to plan to time this right to happen to coincide with the current trends in the market?
[1] https://www.wsj.com/articles/new-uber-ceo-says-company-could... , Aug 30, 2017
Companies usually start to think and prep about IPOs 2 ~ 3 years out. The actual IPO process takes 6 ~ 9 months. People have crammed the process into just 3 months! I built a tool [1] to help startups assess IPO readiness. It's kinda fun to run it against your own employer.
[1] https://ipo-ready.com/
[1] https://ipo-ready.com/
What's the privacy policy on your tool? The data that I enter, do you have access to it?
Not at all, but you're welcome to share the results with us and get additional help / advice. I won't sell you on how seriously we take security and privacy. I built IPO Ready with IPO lawyers and let's just say they don't mess around. Details are in the Terms of Use in the footer.
IAAL. It’s odd that Orrick doesnt mention how the data submitted will be handled. It’s not addressed in the Terms of Use, and there doesn’t seem to be any privacy policy. Also, the fact that you side-stepped a very straightforward question (“What will you do with my data?”) by citing the bona fides of your lawyers is a red flag. Just saying...
I mean, Orrick's name is generally enough for me. They're our lawyers, and talking with any of their partners is like talking with the best engineer you've ever worked with. They just pull apart whatever they're working with.
I mean, who knows, but their reputation is worth so much more than a privacy policy that it's actually enough for me.
I mean, who knows, but their reputation is worth so much more than a privacy policy that it's actually enough for me.
As a former BigLaw lawyer, I find this attitude very misguided and mildly depressing. I’ve worked with good lawyers and bad at firms with big brand names. As firms consolidate further into thousands of lawyers under one name, the variable quality of their advice only increases.
Anyway, even a junior attorney should know that answering the question “what will we do with your data?” is table stakes for putting a form online, especially one that is soliciting your private business information.
(Edited to clarify that even where privacy policy is not required, you still should tell people what you’re going to do with their submissions.)
Anyway, even a junior attorney should know that answering the question “what will we do with your data?” is table stakes for putting a form online, especially one that is soliciting your private business information.
(Edited to clarify that even where privacy policy is not required, you still should tell people what you’re going to do with their submissions.)
Thanks, we like Orrick too! They're very founder-friendly. Talking about engineering, see my other comment about how no IPO readiness assessment input data is sent to our servers.
Fair point. Here's exactly what happens to your data - all your IPO readiness assessment input is stored locally on your computer, and not transmitted to our servers. You can verify this by looking at the app's network activities. Optionally, you can share your assessment with us for additional help. Happy to chat more - ray at ltse.com.
>For those who do know the space well, how far ahead would one be able to plan to time this right to happen to coincide with the current trends in the market?
Planning to avoid a recession is impossible, so I guess a few days? Financial news is primarily written to generate clicks, and nothing does that better than fear. Remember that.
These conspiracy theories that they have some inside knowledge about a correction and are trying to get ahead of it happening need to stop.
The problem is that Uber is probably over-valued, and they want to get in before Lyft which has a much lower (and more reasonable) valuation to hopefully capture some of the market's ride-sharing euphoria before lyft takes and dissipates it all, forcing uber to take a lower valuation and make their investors unhapy.
Planning to avoid a recession is impossible, so I guess a few days? Financial news is primarily written to generate clicks, and nothing does that better than fear. Remember that.
These conspiracy theories that they have some inside knowledge about a correction and are trying to get ahead of it happening need to stop.
The problem is that Uber is probably over-valued, and they want to get in before Lyft which has a much lower (and more reasonable) valuation to hopefully capture some of the market's ride-sharing euphoria before lyft takes and dissipates it all, forcing uber to take a lower valuation and make their investors unhapy.
Don't they have different valuations because Lyft is a pure player while Uber has multiple product lines?
The news story is happening because of yesterday's news
It was well know that both uber and lyft were in competition to whomever would ipo first.
Im sure execs at uber are collectively yelling at their council for fucking this up and being second - it has an immediate color of their IPO being secondary, reactionary, rushed, etc and thus impacts their price accordingly.
Im sure execs at uber are collectively yelling at their council for fucking this up and being second - it has an immediate color of their IPO being secondary, reactionary, rushed, etc and thus impacts their price accordingly.
They rushed the IPO date from 2020 to 2019. That should definitely make you think.
No they didn't. Ever since the new CEO joined, he said 2019.
[deleted]
https://www.reuters.com/article/us-uber-ceo-idUSKCN1BA0JL
> "His plans include rebuilding Uber’s culture and growing market share as well as possibly conducting an initial public offering in 18 to 36 months, according to people who attended the meeting. It is common for venture capital-backed companies to signal an IPO at a vague time in the future."
That Uber has chosen to go towards an earlier IPO rather than later from the upper end of 36 months to the lower end of 18 months is a fact. You can definitely argue that choosing to IPO earlier isn't necessarily a negative thing, but you can't argue away the fact that Uber has chosen an earlier timeline over a later one. Dara has never given a hard date for an IPO by the way, so I'm not sure what you mean by your statement of "he's always said it would be in 2019".
> "His plans include rebuilding Uber’s culture and growing market share as well as possibly conducting an initial public offering in 18 to 36 months, according to people who attended the meeting. It is common for venture capital-backed companies to signal an IPO at a vague time in the future."
That Uber has chosen to go towards an earlier IPO rather than later from the upper end of 36 months to the lower end of 18 months is a fact. You can definitely argue that choosing to IPO earlier isn't necessarily a negative thing, but you can't argue away the fact that Uber has chosen an earlier timeline over a later one. Dara has never given a hard date for an IPO by the way, so I'm not sure what you mean by your statement of "he's always said it would be in 2019".
What you're saying is absolute bullshit.
https://techcrunch.com/2017/11/09/uber-ceo-says-2019-is-the-...
He publicly stated over a year ago that 2019 was the year to IPO. To characterize this as a "rush" is being disingenuous. The 36 months that you're pointing to was never public, so who knows if was even correct or what the context was. His first PUBLIC statement above was 2019, and that was only 3 months after he joined Uber, so 2019 has been the year he has ALWAYS stated publicly.
https://techcrunch.com/2017/11/09/uber-ceo-says-2019-is-the-...
He publicly stated over a year ago that 2019 was the year to IPO. To characterize this as a "rush" is being disingenuous. The 36 months that you're pointing to was never public, so who knows if was even correct or what the context was. His first PUBLIC statement above was 2019, and that was only 3 months after he joined Uber, so 2019 has been the year he has ALWAYS stated publicly.
There was consideration of a wide range of timelines. Given the information we have, it seems like this range was most probably within the stated 18-36 months. A decision was ultimately made to choose an earlier timeline over a later one. Again, this is an irrefutable statement, a fundamental fact of reality.
The only thing that we can discuss and try to figure out from that then, is whether this choice of an earlier IPO over a later one means something. In my opinion, it does. Is this a basis with which we can at least agree on? A discussion without some kind of common foundation to derive from is meaningless otherwise.
The only thing that we can discuss and try to figure out from that then, is whether this choice of an earlier IPO over a later one means something. In my opinion, it does. Is this a basis with which we can at least agree on? A discussion without some kind of common foundation to derive from is meaningless otherwise.
I am calling a market top here with the recent flurry of plans to IPO. Market has been shaky recently and I wonder if investors/founders are trying to get out ahead of a complete meltdown.
Yeah everyone thinks it is a bubble. Investment in anything other than stocks gives you pretty much no return at the moment so everyone is pouring their money into the stock market, possibly resulting in crazy valuations.
Exactly. If they are not getting out now, they might not exit ever.
An IPO is not something you do just at one day out of the blue. It needs a lot of planning and paperwork. Uber has been planning this for for something like a year, since their new CEO came on board. They even started showing their finances and earnings since a while ago, which is not something a private company has to do.
Get out... what? It does not work that way. You can only sell when you have leverage. When you don't you take investment via private equity to bid your time.
Just when you thought bay area housing pries couldn't get any crazier, Uber files for IPO same week as Lyft.
Its a race against the market slowdown. The 6 months cooling (waiting time) is going to be the most nerve racking for employees wanting to sell.
Sounds like they might be better off selling now, on the secondary market.
Most can't do that, since rsus are on a double trigger vesting schedule. That means they don't have any stock to their name until the 6 month cooling period.
The number of Lyft and Uber employees is minuscule compared to the size of the housing market.
In the 6 months from October 2017 to April 2017, the San Francisco housing market was a couple thousand units, per the MLS [0]. Lyft and Uber each have thousands of headquarters employees. The number of employees who will make windfalls in 2019 is easily larger than the number of homes for which they’ll compete.
Minuscule compared to the housing stock sure.
[0] https://www.allisonchapleau.com/marketreports/san-francisco-...
Minuscule compared to the housing stock sure.
[0] https://www.allisonchapleau.com/marketreports/san-francisco-...
That's in SF, a tiny portion of the "Bay Area housing market". Additionally, of those thousands of HQ employees, relatively few of them are going to gain the wealth needed to purchase SF homes. Consider how many of those in are non-tech and therefore low-equity positions as well as it being the case that many (most?) joined much later and had equity packages converging to market comp.
Do most Lyft and Uber employees even have large enough stock grants to buy houses?
Prices have actually been dropping recently
That. Funny enough redfin stubbornly shows my property is gradually up 6% since jan 1st with no drop while I know it’s been +15% just 6 months ago
It’s not unusual to find homes now that have been on the market for over a month and are well below their original list price. That used to not be the case until August.
A friend of mine has been a bankruptcy lawyer in the city since the early 90s and expects rents / property values to significantly shift 6-8 months from now. Who knows maybe it’s all ‘baloney’.
I’m not in the market, we already own a home in the city. It’s just interesting to observe the trend.
A friend of mine has been a bankruptcy lawyer in the city since the early 90s and expects rents / property values to significantly shift 6-8 months from now. Who knows maybe it’s all ‘baloney’.
I’m not in the market, we already own a home in the city. It’s just interesting to observe the trend.
Prices where? In Las Vegas? Maybe.
In the bay area? no.
In the bay area? no.
In San Francisco and the Bay Area yes. Things cooled off around August. Not sure where you got Las Vegas from.
Las Vegas prices are up 5% YoY [1]. San Francisco prices continue to climb and inventory is low [2]. Some regional Bay Area markets are experiencing a slowdown but most are not.
1. https://www.trulia.com/real_estate/Las_Vegas-Nevada/
2. https://www.bayareamarketreports.com/trend/san-francisco-hom...
1. https://www.trulia.com/real_estate/Las_Vegas-Nevada/
2. https://www.bayareamarketreports.com/trend/san-francisco-hom...
You can go on Trulia right now and find homes that have been on the market for over a month and are below their listing price in San Francisco. Things cooled off around August.
Are they profitable? Last I heard they were losing quite a bit of money. [1] And even if they manage to squeak out a GAAP profit, I'm not sure if the business is sustainable. Given that a lot of the capital and operations costs end up on the books of drivers, it's harder to do the math for an end-to-end costs-vs-benefits comparison.
[1] https://www.reuters.com/article/uber-results/uber-narrows-lo...
[1] https://www.reuters.com/article/uber-results/uber-narrows-lo...
They're not close to profitable. Recent quarterly losses:
Q1: $601 million net loss
Q2: $891 million net loss
Q3: $1.07 billion net loss
I can't get my head around that. They lose a fortune every few minutes.
Snapchat is a failing business, but that didn't stop investors
$8,100 per minute apparently: https://www.google.com/search?q=1.07+billion+dollars+per+3+m...
Q1: $601 million net loss, Q2: $891 million net loss, Q3: $1.07 billion net loss
I want them to be successful because I have friends who work there, though I just don't see the numbers working out in ride-sharing.
$120 billion? Wow, so SoftBank 3x’ed their $7bn investment in a year?
Yeah, even if the value and markets drop by 50%, it's still crazy. But long term Uber has potential due to their network and diversity now with other offerings.
So, like the hardest thing uber has done, I think? is that they've convinced local governments to not enforce taxi regulations.
I think this was really hard, and I think it might be durable; I mean, I am generally kinda leftish and support a well-regulated market, but I also heavily use ridesharing in a way I never used taxi services.
But, while those things are hard and valuable... they aren't exclusive to uber. I mean, ride sharing services are highly location based; like less than 1% of my uber use is done outside of the bay area (and most of the time, in those cases, I'd be willing to pay taxi rates and deal with taxi inconveniences)
I personally have fantasised about building a ride-sharing federation system, or a ride sharing clearinghouse system; You'd hook up your local ride sharing co-op with my app, which would allow the customer to input source and destination addresses, and then get quotes from all interested providers.
So.. what I'm saying is that while I see a lot of value in what uber built, I don't really see how they can prevent another company from moving in (on a per-market basis) and grabbing up all their customers.
I mean, I already use both uber and lyft with a preference for whichever seemed cheaper last time I checked. That doesn't seem like a business with a lot of room to improve margins.
I think this was really hard, and I think it might be durable; I mean, I am generally kinda leftish and support a well-regulated market, but I also heavily use ridesharing in a way I never used taxi services.
But, while those things are hard and valuable... they aren't exclusive to uber. I mean, ride sharing services are highly location based; like less than 1% of my uber use is done outside of the bay area (and most of the time, in those cases, I'd be willing to pay taxi rates and deal with taxi inconveniences)
I personally have fantasised about building a ride-sharing federation system, or a ride sharing clearinghouse system; You'd hook up your local ride sharing co-op with my app, which would allow the customer to input source and destination addresses, and then get quotes from all interested providers.
So.. what I'm saying is that while I see a lot of value in what uber built, I don't really see how they can prevent another company from moving in (on a per-market basis) and grabbing up all their customers.
I mean, I already use both uber and lyft with a preference for whichever seemed cheaper last time I checked. That doesn't seem like a business with a lot of room to improve margins.
I've noticed a surge ofex-uber folks looking to angel invest having been popping up in the past few months. I'm excited for this IPO purely for the money that will be invested in transportation this next year.
>I'm excited for this IPO purely for the money that will be invested in transportation this next year.
Not really. More like U.S. pension fund money being used to pay off the Saudi investors, or whoever is behind the SoftBank laundromat.
Not really. More like U.S. pension fund money being used to pay off the Saudi investors, or whoever is behind the SoftBank laundromat.
Talk about surge pricing.
So are these companies rushing to IPO before a 'potential' recession occurs? Does anyone else not feel confident about this? It seems fear driven and not very calculated. Maybe I'm missing the bigger picture..
The prep and planning required for these IPOs were done months before these market drops happened.
That is a meaningless statement. The decision to prepare is distinct from the decision to commit. It's farcical to imagine that these overvalued companies are just filing on sheer momentum. Doing it now is an affirmative decision. Also, the drop began two months ago and the signs of volatility where there in January.
To be fair, they have been talking of a 2019 IPO since more then a year ago.
Whatever the case, the exit-ramps are there at every stage and every moment until you do it. To play this as some kind of rolling ball that couldn't be stopped strains logic and seems basically counterfactual.
I disagree. I think the tension between getting your house in order enough to open your books to the public market and critically important employees waiting around for their stock-based compensation to trigger puts you between a rock and a hard place.
For Uber, it's do-or-die in 2019.
For Uber, it's do-or-die in 2019.
I would assume that when we’re talking about billions of dollars that the people in charge of creating an IPO strategy are a bit more ahead of the markets than the rest of us right? Full disclosure I’m not knowledgeable in this area, but it would seem to me that this is the case and having made plans months before the market turns isn’t necessarily proof that it isn’t being done with market knowledge. Just a thought.
Global markets have been in a downward spiral since the beginning of this year, esp ex US (where most of the growth has been), and if you look at the divergence between the growth this year between US companies, fewer and fewer companies have been holding up the market.
Right but why now? Why would I want to invest in a company that would implode without private investment when we might be facing an economic downturn?
Definitely fear driven. Recently we've seen the biggest sustained downward drops in five years for tech stocks, I think beginning the process now is just too late.
“Definitely?” I see articles on Lyft targeting an early/mid 2019 IPO at least as far back as August, months before the correction.
Agreed.
FAANGMAN is down 22.4% from ATH, and probably in much better shape than Lyft or Uber. I'm probably going to wait for a pop in both prices of these (if they manage to go IPO anytime soon) and then short.
FAANGMAN is down 22.4% from ATH, and probably in much better shape than Lyft or Uber. I'm probably going to wait for a pop in both prices of these (if they manage to go IPO anytime soon) and then short.
Facebook is down for obvious reasons. Apple struggles with sales and innovation. Amazon just made no sense to be rising like that. Some of the others have done fairly well in the recent shake up, like Microsoft for instance.
Microsoft is by far, the cleanest dirty shirt of those. Netflix, Google (Alphabet), AMD, Nvidia… yeah, no.
What’s the AN at the end?
Alibaba and Nvidia.
Search for FAANGMAN in https://www.cnbcfix.com/fast-money-archive-june-2017.html
Search for FAANGMAN in https://www.cnbcfix.com/fast-money-archive-june-2017.html
AMD and NVIDIA maybe?
AMD, Nvidia
The timing may be fear driven, but the fact that they are going to IPO has been obvious for a very long time now. No reason not to go for it at this point.
Get out while the getting is good, as they say.
Launching before a recession is more ideal than before as funding would be easier to secure from the public vs private institutions especially if they continue losing money at this rate.
Right but all this tells me is that the company will implode without further investment. The fact they are rushing to IPO seems like the private investors are wanting the average joe to be holding the bag when it does implode.
I’m assuming the second “before” should be an “after”?
Sustainability is questionable for these firms. Ride hailing and similar services are more likely to evolve into local offerings. It is not a difficult business to replicate, technically, while regulation, infrastructure, social concerns can all be better addressed by local networks. A backlash is growing against exploitation of drivers and privacy weaknesses, which are natural results of the current global aspirations of these networks. I will stay out of these IPOs
It's hard to replicate the chicken and egg market of drivers and passengers.
I don't think it is? most drivers I've asked have used both uber and lyft and would switch for special incentives; I know a lot of passengers who only use lyft because of the bad reputation uber has, but of the uber riders, most of them also have lyft, and switch based on incentives.
I mean, you need a critical mass in a short period of time within an area, but that's just a matter of throwing money at the problem, and there's no reason you couldn't be a perfectly reasonable regional player in this game.
I mean, of course, at current prices, where margins are all but negative, that requires a lot of money; but in an environment where uber charged enough to have a healthy, profitable business? whenever the uber margins started to climb, you'd see regional competitors popping up.
I mean, that's just my guess. We don't know, because we haven't seen a high margin ride sharing pricing scheme, not after uber made it clear that companies didn't need to follow taxi regulations.
I mean, you need a critical mass in a short period of time within an area, but that's just a matter of throwing money at the problem, and there's no reason you couldn't be a perfectly reasonable regional player in this game.
I mean, of course, at current prices, where margins are all but negative, that requires a lot of money; but in an environment where uber charged enough to have a healthy, profitable business? whenever the uber margins started to climb, you'd see regional competitors popping up.
I mean, that's just my guess. We don't know, because we haven't seen a high margin ride sharing pricing scheme, not after uber made it clear that companies didn't need to follow taxi regulations.
Yep, most drivers I’ve talked to also have pretty close communities of fellow Uber and Lyft drivers. They talk a lot and share tips and information. A better offer is all it would take people to jump ship.
$120 Billion valuation on $2.6 billion in annual revenue? Seems like a pretty steep price to me!
Note: I believe that $2.6B figure that I found does not include the amount of ride revenue that goes to the drivers, so maybe that's why the valuation is so high. If you add back in the drivers share of the revenue, maybe the valuation isn't that crazy.
Note: I believe that $2.6B figure that I found does not include the amount of ride revenue that goes to the drivers, so maybe that's why the valuation is so high. If you add back in the drivers share of the revenue, maybe the valuation isn't that crazy.
> $120 Billion valuation on $2.6 billion in annual revenue?
That number is quarterly revenue (and as you say does not include the share the driver takes)
That number is quarterly revenue (and as you say does not include the share the driver takes)
Pricing them at 12X net revenue out the gate is pretty aggressive to say the least. Especially when their margins were -60% back in 2016 and in late 2018, and if anything they've gotten worse with the recent price drops. [1, 2] It's not fair to compare them to the negative margins enjoyed by other tech companies as most software companies are zero-marginal-cost businesses. It's far from clear to me that people would pay the double price per ride it would take to break even.
A few years ago, if I'm not mistaken, they even switched to counting the entire value of an Uber Pool/Express Pool ride as net revenue (something they don't do with their core product offerings) muddying the water. Does anyone know if that's changed? [3]
$120B would price them at the same net revenue multiple as Square ($2.21B/yr @ 25B market cap) while Square has much, much better margins (0% vs -60%) - and is itself widely regarded as not being a cheap buy.
[1] https://techcrunch.com/2017/04/14/uber-shares-growing-financ...
[2] http://nymag.com/intelligencer/2018/12/will-uber-survive-the...
[3] https://www.bloomberg.com/news/articles/2017-04-14/embattled...
A few years ago, if I'm not mistaken, they even switched to counting the entire value of an Uber Pool/Express Pool ride as net revenue (something they don't do with their core product offerings) muddying the water. Does anyone know if that's changed? [3]
$120B would price them at the same net revenue multiple as Square ($2.21B/yr @ 25B market cap) while Square has much, much better margins (0% vs -60%) - and is itself widely regarded as not being a cheap buy.
[1] https://techcrunch.com/2017/04/14/uber-shares-growing-financ...
[2] http://nymag.com/intelligencer/2018/12/will-uber-survive-the...
[3] https://www.bloomberg.com/news/articles/2017-04-14/embattled...
The number of liquid millionaires in the Bay Area will be astounding come next year...
Something tells me property values are going up again. It's been a little weak lately but not after this.
What's the MO for a tech millionaire, do you retire in the bay area or f-off to somewhere where you can retire in luxury? Or keep grinding in SF?
A rank and file employee at one of these cos unless very early is not necessarily getting so much after taxes that they can retire in SF following an IPO...it's house money, not necessarily retirement money.
The median price per square-foot is around $1100 which means that if you make $2 million pretax in an IPO you’re left with approximately $1.2 million after-tax which is the average price of a nice 2br/1.5ba condo, a little short of a single family which is $1.5 million.
I think the MO is based more on age and where you’re at in life, people tend to leave San Francisco in their mid to late 30s and either set up shop in the South Bay, or move home.
IMO That’s why 1-2 bedrooms are so popular here. You buy, then keep it as a rental or sell when you leave.
I think the MO is based more on age and where you’re at in life, people tend to leave San Francisco in their mid to late 30s and either set up shop in the South Bay, or move home.
IMO That’s why 1-2 bedrooms are so popular here. You buy, then keep it as a rental or sell when you leave.
I guess its not mutually exclusive. Buy a house now, then sell it a few years later to retire somewhere else.
Uber’s PR team probably rushed the news out right after Lyft’s IPO announcement to make sure that investors would spend as much time to consider its prospectus as they do Lyft’s.
The possible market crash in 2019/2020 predicted by quite a few prominent economists and approximately $1 billion a quarter burn rate [1] have for a while been major reasons for their upcoming IPO.
[1] https://www.bloomberg.com/news/articles/2018-11-14/uber-reve...
The possible market crash in 2019/2020 predicted by quite a few prominent economists and approximately $1 billion a quarter burn rate [1] have for a while been major reasons for their upcoming IPO.
[1] https://www.bloomberg.com/news/articles/2018-11-14/uber-reve...
There are enough economists that every possible prediction gets made. You shouldn’t lend credence to those who sow fear.
IIRC, it was a survey of at least almost a hundred economists and 80% said by 2020.
I also read reasonings by Roubini who predicted the 2008 Great Recession correctly and Martin Feldstein at Harvard. They sounded quite convincing.
Interestingly, I did not encounter any opinion by an economist that it is unlikely to occur before 2020.
The flurry of upcoming IPOs is also partial evidence of what top VCs and executives at major tech startups think.
I also read reasonings by Roubini who predicted the 2008 Great Recession correctly and Martin Feldstein at Harvard. They sounded quite convincing.
Interestingly, I did not encounter any opinion by an economist that it is unlikely to occur before 2020.
The flurry of upcoming IPOs is also partial evidence of what top VCs and executives at major tech startups think.
Ok. so what is the cause of this great recession? Nafta? China? What?
Rising interest rates and corporate debt, at a guess.
[deleted]
I just made a video summarising last week's HN post on Lyft's filing, check it out: https://youtu.be/Wa9uzVYA4K8
Decades ago companies competed in being the first to bring the product to the market, so enough prospects would try theirs first and become loyal users. These days the competition is about being the first to sell your story to the retail investor before the hype cools down and people get disillusioned about the entire business model (see GRPN, SNAP, etc).
I'm truly wondering how sustainable is this and how hard the market correction will be...
I'm truly wondering how sustainable is this and how hard the market correction will be...
My favorite thing about the public markets is that it doesn't matter how much hype a company garners on TechCrunch, where the founders went to school, or how slick the company office spaces are. A piece of shit is a piece of shit, and conversely, a diamond is a diamond. That's not to say that public companies can't run on hype--they absolutely can--but eventually hype wears off and a company must show that it's a real business.
Have you met TSLA? Public markets are as much based on hype than anything else.
TSLA... the company that doubled its sales in the last three quarters and is outselling BMW and Mercedes in the US?
Just because they've been performing does not imply that they're not overvalued. TSLA has been overvalued for years. That doesn't mean it's a bad investment, it just means it brings along higher risk.
Have you seen https://news.ycombinator.com/item?id=18618365 ? It brought interesting insight into additional factors in TSLA’s valuation
I don't understand how this brings insight into "additional factors" in their "valuation", as the article mentions nothing about their valuation, just that they have efficient batteries.
Many people think of Tesla as a car company, when actually it's an energy company. Other car manufacturers are not.
Their balance sheet still reflects liabilities in terms of showrooms, salaried salespeople for those showrooms, automobile service centers and salaried mechanics at those service centers.
Until those expenses become immaterial in the grand scheme of things, they’re a car company.
Until those expenses become immaterial in the grand scheme of things, they’re a car company.
Reminds me of a quote I once heard (but can't find now) about Ford or GM, that they aren't an automobile company but rather a finance/loan company.
Kind of like big mining companies aren't actually mining companies, they're finance and investment companies. The actual mining is done by contractors three or four tiers down in the contract stack.
No company is a what it actually does company.
> No company is a what it actually does company.
Or perhaps that companies, like individuals, have facets.
Someone calling Google a search engine company is no more correct than you saying they are an advertising company, technology company etc, or in a negative sense, a monopoly.
Each of these epithets refer to the same entity, it's just that each emphasizes a particular trait over other traits for the point being made. A regulator is more much more likely to use "search engine" in conjugation with "monopoly" to characterize Google than with the term "technology company" since their goal is to highlight a potential case of abuse that is known to stem from such market power.
Or perhaps that companies, like individuals, have facets.
Someone calling Google a search engine company is no more correct than you saying they are an advertising company, technology company etc, or in a negative sense, a monopoly.
Each of these epithets refer to the same entity, it's just that each emphasizes a particular trait over other traits for the point being made. A regulator is more much more likely to use "search engine" in conjugation with "monopoly" to characterize Google than with the term "technology company" since their goal is to highlight a potential case of abuse that is known to stem from such market power.
True, but I'd phrase it as "no big company is actually a what-you-think-it-is company."
The question then becomes whether they have a modest cost advantage over other battery makers or a huge cost advantage. A modest one just means they will be the slightly more profitable battery maker.
I think Tesla is actually a tech company, where 'tech' refers to 'technology', not just software. They have developed a whole bunch of cool new tech, and they use it to build cool new products. The specific flavour of tech and product is window dressing to the core methodology.
Tesla is definitely hyped, but that's not the only reason for its market value right now. They are _the_ electric car company, nobody wants other electric cars nearly as much as they want a Tesla.
Yes, no stock has ever been affected by hype.
It can take YEARS for the market to get things right.
It can take YEARS for the market to get things right.
> These days the competition is about being the first to sell your story to the retail investor before the hype cools down
That's an obviously false narrative. Companies are preferring to stay out of the public markets for longer than ever, hence the rise of the unicorn.
That's an obviously false narrative. Companies are preferring to stay out of the public markets for longer than ever, hence the rise of the unicorn.
This first-to-market strategy has largely been discredited in the business world.
I remember reading a Harvard Business Review article many years ago about how it was the go-to strategy for companies launching products in the 80/90s. To gain the "First mover advantage". Turns out there's far too much risk for too little (potential) reward, which the graveyard of countless dead first-mover companies/products attests to.
The dot-com boom really put a nail in the coffin of that idea. Especially for tech companies and any industry with highly capitalized organizations who can move quickly is far more valuable than being the first available.
Plus you get to learn from the expensive mistakes the first companies almost always make.
I remember reading a Harvard Business Review article many years ago about how it was the go-to strategy for companies launching products in the 80/90s. To gain the "First mover advantage". Turns out there's far too much risk for too little (potential) reward, which the graveyard of countless dead first-mover companies/products attests to.
The dot-com boom really put a nail in the coffin of that idea. Especially for tech companies and any industry with highly capitalized organizations who can move quickly is far more valuable than being the first available.
Plus you get to learn from the expensive mistakes the first companies almost always make.
Or buy out the winner, which is likely cheaper.
For example look at Coca-Cola's history of sodas. At a certain scale they realized that buying out new brands was cheaper and less risky than doing the experimentation themselves
For example look at Coca-Cola's history of sodas. At a certain scale they realized that buying out new brands was cheaper and less risky than doing the experimentation themselves
Only a small fraction of IPO shares are allocated to retail investors. If anyone is selling a story it's to the institutional investors who buy most of the shares.
> sell your story.
Their main product is equity now. Notice how instead of positions they now hire for "roles".
Their main product is equity now. Notice how instead of positions they now hire for "roles".
I'd confidently state that I love capitalism, but I'm not very happy with the idea that Uber could turn 17 billion dollars into 7 billion dollars and then hand the bag to retail investors.
The thing I tell myself is that the money is all going to the same place anyway. Yeah, Uber is going to cash out and bomb from their IPO price, and everyone who buys will lose. But anyone who would buy Uber is going to do any number of equally irrational things with their money, not to mention the fact that no matter who "owns" the money it will either be sitting in a bank or another asset, so it doesn't really matter.
http://fortune.com/2018/03/06/how-much-money-uber-spent/
The thing I tell myself is that the money is all going to the same place anyway. Yeah, Uber is going to cash out and bomb from their IPO price, and everyone who buys will lose. But anyone who would buy Uber is going to do any number of equally irrational things with their money, not to mention the fact that no matter who "owns" the money it will either be sitting in a bank or another asset, so it doesn't really matter.
http://fortune.com/2018/03/06/how-much-money-uber-spent/
I have no lost sleep for retail investors who confuse speculation with investment. That’s their money and they do can as they wish.
It’s the forced buy in by funds and pensions that I don’t like. Many are dictated by objective formulas like top N by market cap which may lead either Uber or Lyft to be included quite quickly. Biggest preventer for either may be the “four recent quarters of profitability” requirement. Depending on the IPO and crash timing, this could be a bad one.
It’s the forced buy in by funds and pensions that I don’t like. Many are dictated by objective formulas like top N by market cap which may lead either Uber or Lyft to be included quite quickly. Biggest preventer for either may be the “four recent quarters of profitability” requirement. Depending on the IPO and crash timing, this could be a bad one.
Twitter was just added to the S&P 500 this year. Facebook wasn't added until 2013.
https://www.reuters.com/article/us-sp500-facebook/facebook-t...
The chances of Uber getting into a major index quickly is very remote. On the bright side, Uber has a CFO now :). I doubt many institutional investors will be forced to buy the stock. It will be interesting to see what percentage Uber tries to float though.
https://www.reuters.com/article/us-sp500-facebook/facebook-t...
The chances of Uber getting into a major index quickly is very remote. On the bright side, Uber has a CFO now :). I doubt many institutional investors will be forced to buy the stock. It will be interesting to see what percentage Uber tries to float though.
Active vs. Passive over the 20th century shows that active management doesn't work for the customer.
That actually is factually misleading. Active has greatly outperformed in foreign securities net of fees:
https://www.ft.com/content/d93100ca-acf4-11e6-9cb3-bb8207902...
In domestic markets, active management has not out-performed net of fees, but there are bad people in every profession:
https://www.nb.com/pages/public/global/insights/the-overlook...
You also have to remember these statistics only look at mutual funds and most of the best investors don't offer mutual fund products. Passive investing should work for many investors. I think fees though are a bigger culprit though than active vs. passive.
https://www.ft.com/content/d93100ca-acf4-11e6-9cb3-bb8207902...
In domestic markets, active management has not out-performed net of fees, but there are bad people in every profession:
https://www.nb.com/pages/public/global/insights/the-overlook...
You also have to remember these statistics only look at mutual funds and most of the best investors don't offer mutual fund products. Passive investing should work for many investors. I think fees though are a bigger culprit though than active vs. passive.
You linked me to a study that eliminated the bottom quarter retrospectively. I too can make money if you let me ignore all my losing trades.
By that article, Uber took in $17+ billion dollars, showed losses of $10+ billion, and created a company worth an estimated $70+ billion. Even give them a 75% haircut from there and they still broke even once you cash cow the company, harvest the tax losses in future years, and eventually wind it down. I'm not buying in at $72B, but it's not clear at all that they've destroyed investor value nor certain that they will in the future.
Sort of looks like the VCs are pumping up valuations and then looking to the public markets to then dump their investments. I can't remember who said this first, but I think it's accurate.
Lot of crooked unscrupulous shit going on in the financial sector! Uber is a legit "unicorn," but $120 billion dollars??? This is the dot com bubble all over again. I know this isn't technically illegal, but it should be.
Lot of crooked unscrupulous shit going on in the financial sector! Uber is a legit "unicorn," but $120 billion dollars??? This is the dot com bubble all over again. I know this isn't technically illegal, but it should be.
Many Fidelity mutual funds managing assets of retail investors hold (private) Uber stock.
Hm, would those be interested in keeping it private so Uber doesn't lose so much value or getting it public so they can quickly cash out?
This man speaks the truth right here!
I predict that Uber won't meet their subscription goals during the road show and be forced to push off their IPO until 2020 at least, and that Lyft will make it through the gate but will come out with less than a 10% bump in price.
I'm basing that on an investor sentiment that Lyft is more of a 'pure play' in the ride sharing market and Uber is a mix of several businesses which each have their own risks and can pull the company down even if their core business is ok.
Now to wait a year and see how well it ages, hopefully better than MacAfee's bitcoin tweets! :-)