Ctrl + N
Uber’s broad global footprint is an attractive selling point to Wall Street investors. But the flip side is that the company must navigate local political and policy concerns about how it operates not just in the United States, but within about 63 countries.
International expansion is essential to its future, as the company acknowledged in a filing to the Securities and Exchange Commission. Markets outside of the United States accounted for about 74 percent of all the company’s trips. But the company is also acutely aware of the risks to its bottom line and reputation that its services in overseas markets pose as it barrels toward its initial public offering expected today.
“This is a very difficult company to value because so many things could go wrong, and it also has such large potential upside,” said Jay Ritter, a finance professor at the University of Florida specializing in IPOs.
Uber is almost certainly the most complicated gig economy business to go public so far to date. Uber’s top rival, Lyft, doesn’t have these international worries because its business operates only in the United States and Canada.
Uber's rise depended on the battles it waged — and won — with U.S. regulators and policymakers over the past decade. As it dicloses potential risks to investors, Uber notes its success will in part hinge on its ability to win over leaders across the globe — and it’s uncertain whether the same playbook will work.
Uber's business model, for instance, depends on classifying its workers as contractors, not employees. But how regulators respond in other countries may vary. “It may be very different than what they do in the U.S., which is complex enough,” said Carl Tobias, a law professor at the University of Richmond in Virginia. “Just multiply the difficulties in the U.S. when you’re abroad, especially in newer cities and countries that have their own ways of doing things.”
The problems operating in new markets were on full display in China. In 2016, it retreated from a costly battle in China with local rival Didi Chuxing due to the hefty losses it was suffering by forking over driver and rider subsidies in order to operate. Instead of trying to compete, it took a stake in Didi. "Conducting our business internationally, particularly in countries in which we have limited experience, subjects us to risks that we do not face to the same degree in the United States," the company said in the filing last month.
Here's a breakdown of regulatory and safety risks the company is facing abroad that Wall Street will be weighing as the company begins trading today, according to the company's filings and IPO experts:
1. The classification of drivers as contractors remains an open question in many markets.
Regulators around the world are challenging the way Uber classifies its workers. Even as U.S. drives protested the company's wages and working conditions this week, the global view is much different. A Swiss agency just this week ruled that an Uber driver is an employee for whom the company must pay social security contributions. Late last year, a United Kingdom court upheld a ruling that the company that would require the company to give drivers benefits such as paid vacation and minimum wage.
2. In some international markets, the taxi industries are strong and have learned from Uber's swift expansion in the United States. It could pressure regulators to block Uber’s expansion and favor local businesses.
Uber warns in its filing that its business abroad could be hampered by competition -- especially from taxi companies that understand the local market better than it does and "are favored by government or regulatory authorities in those markets." Many taxi drivers, particularly in European countries, have launched strong opposition to Uber's expansion into their cities. For example, Germany has severely limited ride-hailing services like Uber, and taxi drivers have organized massive protests against efforts to ease those restrictions.
3. The company could suffer reputational damage because of safety incidents involving the service abroad.
When a passenger or driver is harmed in one country, it can do damage to Uber's brand around the world. In its filing, the company cites examples of cases abroad that have hurt the company's image, such as a 2014 incident when an Uber driver in India was convicted of kidnapping and raping a female passenger. The company also warns that in Latin America there have been numerous reports of both drivers and passengers using the service being victimized by violent crime -- such as armed robbery, violent assault and rape.
4. Consumers pay for rides and meal deliveries in cash in certain jurisdictions — potentially raising regulatory and safety concerns.
Uber says cash-paid trips accounted for 13% of its global gross bookings. But the company also warns that the use of cash can increase security issues for both riders and drivers, increasing the likelihood of robbery, violent or even fatal attacks. The company says it also opens it up to regulatory scrutiny.
"For example, many jurisdictions have specific regulations regarding the use of cash for ridesharing," the comapny writes. "Failure to comply with these regulations could result in the imposition of significant fines and penalties and could result in a regulator requiring that we suspend operations in those jurisdictions."n
5. The company has faced Federal Trade Commission scrutiny at home. But other countries' regulatory bodies also probed it for privacy and competition issues.
Uber's 2016 data breach didn't just put it in the glare of regulators here. It opened the company up to fines around the world. U.K. and Dutch regulators imposed fines of nearly $1.2 million related to the breach. And fines from international regulators over privacy regulations may only intensify now that the European Union's General Data Protection Regulation is in effect.
The company has also faced scrutiny for anti-competitive behavior, especially as its international strategy relies heavily on mergers and acquisitions. For example, Singapore's competition regulator imposed fines and restrictions on the company in relation to a transaction there with local ride-sharing company Grab.
BITS: As Uber goes public with a valuation of about $82 billion today, the company says its real strength isn't in being a taxi alternative. Instead, the company is selling itself as a routing software juggernaut that can reimagine how goods and people move around the world, my colleagues Faiz Siddiqui and Greg Bensinger write.
The company's top rival therefore isn't Lyft — it's Amazon, according to analysts. The company's new businesses include freight forwarding, food and package delivery. That's why the company thinks it's worth twice as much as Ford Motor Co. or four times as much as Fiat Chrysler.
But there are major impediments to that vision, my colleagues write: “For one thing, it hasn’t yet been able to solve the problem of food arriving cold upon delivery.”
Uber's food service, Uber Eats, maintains vast troves of data that predict food preparation time or recommend food and restaurants to customers. But beyond the algorithms, reality is hindering the business. Food isn't ready for pickup, drivers who run in to pick up orders can't park, and food often arrives to the customer late.
“We are still barely scratching the surface when it comes to huge industries like food and logistics, and how the future of urban mobility will reshape cities for the better,” Uber CEO Dara Khosrowshahi wrote in a letter that is part of the company’s filing to go public.
NIBBLES: The United States blocked a Chinese state-owned telecom company from doing business here and providing phone services to American customers — a signal of fears that Beijing aims to surveil U.S. communications networks, my colleague Tony Romm writes.
The Federal Communications Commission in a unanimous decision banned China Mobile, a telecom giant with a U.S. subsidiary that operates at a key position for international phone traffic.
Republican FCC Chairman Ajit Pai charged that the firm is “owned and controlled by the Chinese government,” a connection that raised a “significant risk” that authorities there could “conduct activities that would seriously jeopardize the national security, law enforcement and economic interests of the United States.”
Some of the agency's Republicans and Democrats even encouraged the FCC to take additional steps to block other Chinese-tied telecom giants from operating in the United States or selling equipment here. They're calling for scrutiny as White House and Chinese officials are engaged in tense negotiations over tariffs the United States imposed.
China Mobile didn't respond to a request for comment.
BYTES: Amazon chief executive and Washington Post owner Jeff Bezos is making a pitch to join the Trump administration's effort to have people return to the moon within five years, according to The Washington Post's Christian Davenport.
Bezos unveiled a life-size mock-up of the lander his company, Blue Origin, is developing to carry cargo and supplies to the surface of the moon ahead of a human landing.
Davenport writes, “he made an emotional case for humanity to expand out into the cosmos, a passion he has held since he was a child and has called the most important work he is doing today.”
Bezos and Trump have clashed on many issues, but the tech mogul lauded the administration's proposal to get people back to the moon quickly.
“I love this,” he said. “It’s the right thing to do. For those of you doing the arithmetic at home, that’s 2024. And we can help meet that timeline, but only because we started three years ago. It’s time to go back to the moon — this time to stay.”
But neither the Trump administration nor Bezos have been very transparent about how much such an endeavor would cost. Bezos didn't say what the lander, dubbed “blue Moon,” would cost or when it would be ready to fly. The White House also has provided no details on how it would achieve that or cost estimates, and the rocket NASA would use to get there has suffered delays and is billions over budget.
-- Tech news from the private sector:
-- Tech news from the public sector:
Facebook co-founder Chris Hughes's op-ed in the New York Times calling for the breakup of the social network drew widespread attention in Silicon Valley and in Washington, where some politicians have suggested the company should be probed for antitrust violations.
Hughes appeared on NBC News to share why he wrote the op-ed, and what it means for his relationship with Zuckerberg:
"I'm angry at Mark and I'm angry at a lot of Facebook's leadership..."— NBC Nightly News with Lester Holt (@NBCNightlyNews) May 9, 2019
Facebook co-founder Chris Hughes speaks out to @TVKateSnow after calling for the tech giant to be broken up. https://t.co/DgOB4jPfTr
Watch more tonight on @NBCNightlyNews. pic.twitter.com/dwp57g6n2f
2020 Democratic presidential candidate and Sen. Elizabeth Warren (D-Mass.) once again called to break up Big Tech, a key pitch she's making on the campaign trail:
Chris Hughes is right. Today’s big tech companies have too much power—over our economy, our society, & our democracy. They’ve bulldozed competition, used our private info for profit, hurt small businesses & stifled innovation. It's time to #BreakUpBigTech. https://t.co/rZMftEwlkN— Elizabeth Warren (@ewarren) May 9, 2019
The Wall Street Journal's Christopher Mims was skeptical a breakup would change the company's impact on democracy, but said a breakup could improve competition:
I don't think breaking up Facebook will improve how it manhandles democracy.— Christopher Mims 🎆 (@mims) May 9, 2019
I do think it would increase competition in new, interesting and useful ways. https://t.co/X1qjYNbVmG
Bloomberg reporter Sarah Frier warned it's going to get harder to do what Hughes is proposing -- especially if Facebook follows through with its plans to tie together its WhatsApp, Instagram and Facebook messaging services:
This piece by Facebook co-founder @chrishughes is a big deal. And it would indeed be harder to break up Facebook in the future than it is now. Facebook is working on integrating their apps, making it more difficult to disentangle them. https://t.co/2all3KX1kn— Sarah Frier (@sarahfrier) May 9, 2019
Initialized Capital's Kim-Mai Cutler said:
None of the ideas in here are new. They have been repeated for a few years by a small coterie of neo-Brandeisians. Yet this is the most powerful statement because of who said it. https://t.co/DO2BbVzckg— Kim-Mai Cutler (@kimmaicutler) May 9, 2019
Facebook responded to the op-ed -- and its tone was angrier than usual, BuzzFeed's Alex Kantrowitz wrote:
-- Technology news generating buzz around the Web: