Uber Wants Another Billion-Dollar Loan Even After Raising Billions in the Past 5 Years

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(Brandon Bhangoo) #1

It seems that all the billions Uber has raised are not enough to finance this black hole of money. Now Uber has confirmed it wants to raise a further $1.25bn through a leveraged loan. This decision comes after Uber releases its annual losses for 2017, a total of $4.5bn.

It's amazing that most stable companies will go bankrupt when facing such a loss, but Uber for some reason continues to persuade investors and now banks to throw their money away into this bad venture.

Basically, businesses in the software business, and that is what Uber is, a software company selling the use of its app to drivers and companies but holding no actual assets that can be sold to cover its investments, usually close shop well before they balloon into giant hydrogen bombs of inflated value.

In a recent analysis of the business model, Uber owns zero physical assets. It has no real estate, no vehicles, no technology that is so unique to make it worth anything. All Uber has is a large list of customers and drivers with global coverage. This might seem to be enough to give it value, but in fact, it is not, a company's business is to make money, not lose it. Uber is a venture business that is trying to prove it can be profitable, in essence, it should be, but with so many competing rideshare companies that have a more solid and conservative beginning, Uber looks like it is ready to implode.

The valuation that Uber received, around 48bn in 2017, which was set by SoftBank when it decided to invest $1bn in Uber and buy out shareholders with a further $9bn, makes Uber an interesting company for new investors. It also provides a grip for loan companies to consider such a large loan base.

The loan will maintain shareholder integrity and will be used to finance the companies legal and operational costs as well as help CEO Dara Khosrowshahi, to continue his reach for operational excellence and reduce overheads to maximize income. Khosrowshahi needs a lean company for its 2019 IPO.

However, let's take a look at this new situation. Uber, which has raised billions, is losing billions and is nowhere near a profit-making solution. In fact, no rideshare company has yet reached profitability; they are all working on private equity and constantly raising funds to fuel their constant losses. This is the first time a loan of this size has been asked for by a company of this nature, it will be interesting to see which financial institution will take a chance, literally a gamble, and give their money to a company that has no proof of repayment, it has no assets and can only rely on its "market value" as a base for the loan.

A loan is different to an investment. An investment is a calculated risk; a loan is a secured sale of money for money. The result of Uber's loan request will be scrutinized by every financial institution in a different light to the way investors scrutinize. Now we will see what Uber's real value is, and how much it will cost them.


All About Uber's 1 Billion-Dollar Loan from Shareholders
(Andrew Martin) #2

Its obvious that Uber is trying to get more money out of its investors and seeks a new way to do so. A syndicated loan is an amazing tool for companies that want to keep their finances secret, as well as secure their investors from dilution. I think its a bold move by Khosrowshahi, and I hope it works our well. He does have to manage to reach the 2019 IPO, and with all the legal battles and issues facing Uber globally, its no wonder Softbank is trying to pull Uber back into a manageable size.


(Jose Hernandez) #3

Don’t cut prices by 20% in a ton of cities instantly as a “winter discount” when it was a permanent discount …we were already cheaper than cabs in our city. It might have taken longer to get customers, but in the end, we would have won. The unnecessary move screwed over drivers big-time and Uber’s business at large. And due to decisions like this, they keep getting sued, which costs them a lot in legal fees. They spend a lot of money on legal fees on a whole bunch of issues…I don’t know what the answer to this problem is. I presume that another ride-sharing company in each country will attempt to address Uber’s failing points (such as Lyft), and then drivers can utilize those other platforms. As for Uber, I don’t know.


(Eric Moore) #4

drivers…get the money while you can and for the love of God don’t start doing this as a full time job. One way or the other this will be gone within three to five years.


(Harold Young) #5

@eric Uber will, but rideshare, in general, is here to stay.


(Trish Richardson) #6

Uber isn’t going anywhere. They might get bought out, but they’re not going out of business. Too much money to be made.


(Michaela Biksacky) #7

They need to stop the robot cars. Reinvest in people. Keep qualified quality cars and drivers. I don’t know anyone who has said hey I couldn’t wait till I get in the car with a robot driver. Too many variables.


(Trish Richardson) #8

Uber is a nine-year-old company That pulls in 15 BILLION in revenue a year I and operates in over 600 territory’s around the world. If you think ride share isn’t here to stay, you’re crazy. Once all the kinks are worked out, the infrastructure is in place, and they CAN stop with all the advertising and cut back and unnecessary expenses uber will be MASSIVELY profitable. But they’re still a very young company. Give it 10 years. Might not be owned by the same people, it won’t have the same name, but really, it’s not going anywhere.


(Steve Mann) #9

Uber is just taking money from their investors to pay it back with interest. Another way of getting money out of Uber when they reach the IPO.