On the other hand, if you were Uber, you could blow through that money in three months, subsidizing takeout, scooter rentals and car shares for the residents of select urban areas worldwide. This, as we learned on Monday, being how much Uber lost in the third quarter of 2019.
If you own Uber stock, you have to be asking yourself just how long the company can keep this up and what happens when Uber has to charge us what it costs to provide all these goodies.
The answer I gleaned from Uber’s earnings call Monday is that company executives think it can’t go on very long, but also that it won’t have to. Stripped of all the management-speak and the quirky alternative metrics the ride-hailing service touts to avoid dwelling on how much money the company is losing, Uber’s theory of its future is simple: Trim costs and goose revenue where it can, and wait.
Uber managed one of the last initial public offerings before WeWork proved that, no, the public markets don’t have infinite appetite for money-losing companies with highly speculative business models. And the private markets, which had been more forgiving, have also started to balk. Uber seems to expect that, pretty soon, undercapitalized competitors will run out of cash and implode, allowing Uber to raise prices without bleeding too much market share.
There are, of course, some potential flaws in this theory. The first is that while “wait” may work for food delivery, in Uber’s other big sectors, ride share and “micromobility,” Uber’s big competitor is Lyft, which had its IPO first, and more successfully than Uber — not because Lyft is necessarily a better company (it’s also losing boatloads of money), but because it went first. Uber’s war chest just isn’t big enough to keep hemorrhaging cash in the hopes that Lyft bleeds out first.
The bigger risk is that even a duopoly, if that’s where we end up, won’t make money. The barriers to entry into the ride-share market are fairly low; all you need is a car and a coder. Maybe Uber never can make more than an evanescent profit, because every time the pickings get a little fatter, some upstart will come in and compete its margins back down to subsistence.
This week, Uber’s “lock-up period” comes to an end, which means insiders will finally be able to offer their shares on the public markets. So come the closing bell on Friday, we’ll have a good idea what the people in the best position to know think about the company’s future. Do they believe so wholeheartedly in future profits that they want to hang onto every share? Or are they eager to hedge their bets?
A certain amount of selling should be expected, of course. A lot of employees have taken stock in lieu of compensation and will need to liquidate some of it to buy homes and so forth. Too, the private investors who poured tens of billions into the firm during its early years may want to lock in their profits — or their losses, as the case may be. But very heavy selling will be a red flag, not just about the prospects for Uber investors, but for urban life over the next decade.
Whatever else you want to say about Uber, it has, in its brief existence, managed to transform the fabric of American city life. The company has made it easier to go without a car, particularly in places that aren’t well-served by taxis or mass transit, and most particularly low-income areas. It has made it easier for people who need a little cash to pick up a side hustle that fits around the rest of their lives. And, now, it’s pushing residents of congested cities toward “micromobility” with its electric scooters and bikes.
Already, in Washington, one occasionally looks up to realize that a street has more scooters on it than cars. If Uber and its competitors have a future, then in five years, those changes will be even more striking, and more durable. And if it doesn’t, then in considerably less than five years, Washingtonians, and our urban brethren across the land, are going to face a mad scramble to reconstruct whatever it was we used to do for transportation in our now-almost-forgotten past.