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Because stupidity doesn't deserve a lot of space to be discussed, I'll keep this really brief.
Uber is stupid for waiting so long to go public.
As I predicted, its IPO has gone over like a lead balloon. CNBC - bless 'em - charitably called it a "stumble" when the freshly minted stock dropped nearly 7%. I call it "bombed."
By going public now, with its reputation close to tattered, Uber is going to disenfranchise its drivers, who will collectively further distance the company from maybe ever making a profit.
As Forrest Gump (who may be underwriting stock issuances now that he's out of the running game) reminded us: "Stupid is as stupid does."
This stock was doomed from the get-go. Here's why...
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They Saw... They Know... They Want OUT
After 10 years in existence and raising about $24 billion in venture capital, private equity, and late-stage investor money, Uber's gone public.
Why now?
Because all those early investors want to book some paper profits or cash out for good.
They know Uber is losing money, and they knew that just like Lyft Inc. (NASDAQ: LYFT), Uber's IPO would probably crash and burn.
They saw what early-stage Lyft investor Carl Icahn did with his 2.7% stake in Lyft. Icahn privately sold his entire stake, all $550 million worth, reportedly to George Soros, days before the IPO, at close to the IPO price.
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Uncle Carl's laughing because Lyft IPO'd at $72, and two weeks later, the stock's below $53.
Yeah, Uber's early investors want out.
And the public pool of fools is their preferred dumping ground.
Who wants to own shares in a company that's a perennial loser of money?
$6.8 Billion Up in Smoke and We're Just Getting Started
Okay, you've heard that Uber lost $3.3 billion in 2018, and that's after it made a one-time gain of $997 million selling an international business... where it was losing money.
The year before, Uber lost $4 billion.
From 2014 through 2018, the five years for which Uber reported financial data as part of its U.S. Securities and Exchange Commission registration, the company lost a cumulative $6.8 billion.
$6.8 billion... <poof!>
In that same registration filing, Uber warned in the risk factors section that it has "incurred significant losses since inception" and expects its operating expenses to "increase significantly in the foreseeable future."
"We may not achieve profitability," Uber stated. Because it had to.
If you didn't read the registration statement and you invested in Uber, you're stupid.
That's because you probably read some of the fluff about Uber.
The company had 5.2 billion rides last year. Wow!
Gross bookings on those rides amounted to $50 billion. Wow!
Total revenues last year amounted to $11.3 billion. Wow!
Yeah, but wow this: It lost $0.58 per every ride.
Sound like a business that makes sense?
Not really. That's why it's spending billions on food delivery, bicycle ridesharing (LOL), and self-driving cars.
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A significant expense for Uber is research and development, spent mostly on the company's efforts to develop self-driving cars through its Advanced Technologies Group. In 2018 the R&D spend was $1.5 billion, or 13% of revenue, up from $1.2 billion in 2017.
Of that $1.5 billion, $457 million was spent on Uber's autonomous vehicle research, up from $384 million in 2017.
Let me put that in some perspective. Not financially, though - fundamentally.
Uber's business is based on "entrepreneur" drivers working the streets with their own cars. They don't get minimum wage. They don't get benefits, and they don't get stock options or a pension plan. They get to work for themselves - while they depreciate their cars.
And Uber wants to go "driverless"?
Some drivers are currently on strike. Not all of them, though, because there is no union or collective bargaining - just millions of drivers trying to make a buck for themselves in the U.S. and pounds, euros, shekels, rupees, whatever, elsewhere around the world.
They're going to look at the failed IPO and realize the company they are "contractors" for is a poorly managed, money-losing juggernaut that, by the way, doesn't do squat for them.
So, they're going to fight for better working conditions, meaning maybe a minimum wage, and for sure benefits.
If Uber loses to its drivers and labor costs rise, the company will never make money. But then again, it warned us as much...
And you want to buy Uber?
Go ahead.
Stupid is as stupid does.
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Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
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