Thursday, December 22, 2016

Funny money

I’m not 100% there yet – I’ll still call a Boston Cab on occasion – but I’ve gotten myself increasingly hooked on Uber. It’s cheap, it’s convenient, and I haven’t had any drivers who were psycho. On the contrary, most have been pretty interesting to talk to. Sure, I’ve goofed up a couple of times and ordered UberBlack, which costs more than a cab. But live and learn.

Anyway, for now I’m an Uber-ite. I’m not sure how I’ll feel in a few years when the fleet is fully autonomous and there’s no interesting driver to talk to. (I will definitely refuse to interact with something robotic.) Bottom line: I’m not Uber Über Alles, but I do like the service.

Speaking of bottom line, as an Uber user, I was interested to see that, so far this year, the company has lost an estimated $2.2 billion, and is staring down a full-year loss of $2.8 billion It would have been worse if Uber hadn’t failed in its attempt to Uber-ize China, which earned a windfall when they sold out to a Chinese competitor. (Am I the only one who remembers when $1 billion was a ton of revenue, and unthinkable as a loss?)

At the same time, the company's revenue has continued to grow even after leaving the world's most populous country. Uber generated about $3.76 billion in net revenue [revenue after payments to its drivers] in the first nine months of 2016 and is on track to exceed $5.5 billion this year, said the person, who asked not to be identified because the information is private. (Source: Bloomberg)

But income and losses ain’t nothing when compared to Uber’s valuation, which stands at $69 billion. Closely held, so not market cap. And paltry when compared to the market caps of the big players. (In case you’re interested, the Top Ten are Apple at $624.2 billion, Google, Microsoft, Berkshire Hathaway, Exxon Mobil, Amazon, Facebook, Johnson & Johnson, JP Morgan/Chase, and GE bringing up the bottom of the Top Ten with a market cap of $284.2 billion. (Remember when the Dow Jones Industrial Average was actually – get this – industrial?)

I believe that these guys are all profit makers – even Amazon – but I continue to be amazed at how much companies, like Uber, that lose money can be so highly valued. It’s all in the promise, I guess. Think how profitable Uber can be when it owns a fleet of autonomous vehicles and doesn’t have to pay squat to its drivers.

Still, whatever the promise, $69 billion is a lot of money. So here’s my question: how funny will the money be if and when Uber goes public?


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