By Christopher Pitts
- Uber’s market cap is $70B
- Approximately 22% of U.S. Uber drivers are Black
Ride hailing giant Uber’s (UBER 2.53%) failed IPO and driver discourse has caused many investors to worry. In the decade that Uber has existed they have yet to turn a profit, and in 2018 lost more than $3 billion, the equivalent on average of 58 cents per ride. Between global driver strikes and operating in the red, can the company mend its front life staff and turn a profit in the fiercely competitive ride sharing market?
Why This Matters: Approximately 22% of U.S. Uber drivers are Black, most of them using this as the primary means of income for family stability. Additionally, though strikes can result in change, it also can damage the employee-employer relationship. This IPO places the livelihood of Uber drivers in the hands of shareholders, whose only interest is currently the bottom line for a company with a market cap of $70 billion.
Two days before Uber’s IPO drivers made headlines after leading a global strike. The impetus for the strike results from the business decision to significantly cut driver’s wages, some saying as much as 50%. According to company executives this move was necessary to maintain a competitive advantage in certain markets, and was driven by pressure from investors who want to turn a profit now rather than later. In its prospectus, Uber admitted that if it were forced to classify its drivers as actual employees rather than contractors which it currently does, that change could prove to be costly.
In 2018 Uber lost more than $3 billion, the equivalent on average of 58 cents per ride
Wall street analysts actually echo Uber’s concerns when it comes to ride sharing drivers and the competition to retain them. Wedbush analyst Dan Ives notes that the pressure on Uber’s stock has been the jaw dropping decline of ridesharing brethren Lyft’s (LYFT -3.26%) stock since its IPO is down 30% on fears around valuation. There are also general competition fears that will hurt both Uber and Lyft as they fiercely compete for market and mind share of consumers and drivers going forward.
Situational Awareness: Recognizing the dissention among its drivers, Uber executives made shares of its IPO available to some of them, albeit very little. Of the total offering, three percent was reserved for U.S. drivers who had the option to use their bonuses to purchase up to $10,000 worth of stock in the company. With this disappointing showing in its market debut, it is expected that the majority of drivers kept their cash reward and didn’t exchange it for stock.
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