With so much fluctuation in ride-share markets, the development of driverless cars and AI applications and the constant battle for global expansion and control of local markets, its no wonder rideshare companies Uber and Lyft are attracting more investors. Even though both companies report constant losses, their potential is fully understood.
This article will review the latest developments in brief.
Uber: Dragoneer, SoftBank, Didi and Vision Atlantic
Recent activity in the investment markets is causing quite a flurry and speculation over the new joint venture group comprised of Dragoneer (USA), SoftBank Group (Japan) and Didi Chuxing (China). These investors came together around August 2017 to discuss a possible injection of cash as well as buying out employee shares too.
Bloomberg reported that Uber was seeking to raise from the investor group between $2 billion and $10 billion in total and the venture capital group has around $100 billion to use for investments via its Vision Fund. There is also talk of Vision Atlantic joining in. This investor group will most probably form a special construct (legal framework) for this investment project.
This particular round of investment will be large due to Uber's current market value set at $70 billion. Uber is also quite market ready after the recent executive board shakeup and in house cleaning.With new direction focusing on providing a more profit-making approach, such as closing Uber's Xchange leasing program that cost the company close to a third of a billion in one year and by increasing driver centered services to improve the driver-Uber relations. This new deal allows employees and other investors to cash out, which had been restricted until now. In fact, Uber has been buying back shares from employees during the year. The new CEO Dara Khosrowashahi stated that an IPO was also being considered, but that would only be viable after at least 18 months.
Lyft and Alphabet
Googles holding company Alphabet recently sealed a deal investing $1 billion in Lyft specifically for their riderless car project.This came directly after Alphabets fall-out with Uber and the resignation of Alphabets representative on Ubers board; the CFO of Waymo. Alphabets riderless driving project Waymo is also suing Uber for infringements in the riderless car technology venture they had going together.
The $1 billion will come from CapitalG, Alphabets private equity arm and comes after Waymo signed a joint partnership deal with Lyft. Unlike Uber, Lyft has always been a more conservative company with its approach to spending, and since Lyft never had the resources that Uber had, this $1 billion is about equivalent to a $10 billion injection fo cash into Uber. The main difference will be how Lyft deploys the money and how it continues to increase its market share in the US and Canada. Lyft has been slowly gaining a foothold in the US, raising its hold by up to 30% market share in some cities and Lyft looks set on continuing this slow by certain progressive march while Uber still has to deal with government probes and lawsuits.
Uber: Dara Khosrowshahi, CEO
It took a few months, from July to be exact when Travis Kalanick stepped down, to find a replacement. Ubers executive decided on Expedia's CEO Dara Khosrowshahi, and he accepted the challenge, and a challenge it will be.
Dara's first main challenge will be to restructure Uber's business model, analyze with of the many loss centers are only loss centers and cut them out. He will also have to find ways to stem the continuous growth in favor of strengthening Ubers hold in all the centers it currently has. The Uber concept is a sound one, the process that Kalanick used to reach such a megalomanic position was financially suicidal, and that is reflected in the company continuous $2-3 billion losses per annum.
What most people don't like to remember or don't know is that around seventy percent of all ventures close due to financial insolvency, or to put it in layman's terms, the idea is great, but it just can't sell. It appears to be the same case with Uber. Since Uber is a black hole for funds, it might need to be cut down into am ore manageable size. We won't go into how we would do this, that's for the new CEO to figure out, and also take into account all the shit that's going to hit the fan once the government probes start to swing into full gear alongside the many high profile lawsuits. One wonders what the new CEO thought he was doing when leaving his cushy job in Expedia for this driving (walking) disaster.
Evaluating Uber is a major issue, while it has been set at $70, the question of the day is; is it worth that? This company makes losses, it only makes losses, no matter how big its income, they are based on incorrect algorithms. If you cut out the subsidies what will you be left with? Another issue is assets. Uber might deploy millions of drivers, but they don't own them or their cars, so what is the corporate fixed asset value, if it even has one? Ubers dash to the riderless car sector is not enough to save it, the time required to develop a full network and eco-system fro driverless cars s at least two decades out. Uber Eats and other delivery options are still too young to be effective, and the only thing that remains is to make the original purpose, the ride-share driving operation profitable.
With only 4% of all Uber drivers staying over a year! The internal mechanisms and legal framework need a full overhaul. Shutting down Uber Xchange lease without finding another solution was not clever, shutting down the high loss Xchange lease program was a good idea, but it left many drivers and potential drivers without a car solution. Uber still has a lot of reaches and is still a global leader, but it has to bolster up the driving operations I such a way that will make them generate income without subsidizing anything.
One final word, how much did Uber offer Dara? After all, he did make $95 million in 2015 from Expedia, and he does hold over $185 million in Expedia stock.