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Uber and Lyft IPOs May Still be a While

Posted on Tuesday, May 22nd 2018

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The year 2017 was not a very friendly year for ride-sharing giant Uber. The company was embroiled in controversy surrounding its corporate culture and business practices, it let go of its founder, and continued to deal with legal cases relating to trade secret thefts. Uber continues to pay for its issues in the current year as it struggles to regain some of that lost ground.

Uber’s Financials

According to recent reports, Uber’s gross revenues grew 85% to $37 billion. On a net basis, revenues grew to $7.4 billion, and it ended the year 2017 with a loss of $4.5 million. For the fourth quarter of the year, Uber saw gross revenues grow 61% to $11.1 billion. Net revenues for the quarter grew 61% to $2.2 billion – a record level for the company. It ended the quarter with a net loss of $1.1 billion. It is still not profitable in most of its US markets. At the end of the quarter, Uber had $6 billion in cash and reported a negative cash flow of $160 million for the quarter. Uber is still privately held and is not required to disclose its financials. However, it has decided to publish some of its financials to help the market understand where it stands.

Uber is venture funded so far with $21.1 billion in funding from investors including Saudi Arabia’s Public Investment Fund, Morgan Stanley, AITV, Baidu, Benchmark, Bennett Coleman and Co, BlackRock, CrunchFund, Cyan Banister, Data Collective, Fidelity Investments, First Round, Foundation Capital, Founder Collective, Garrett Camp, Goldman Sachs, GV, HDS Capital, Innovation Endeavors, Jeff Bezos, Kleiner Perkins, Lone Pine Capital, Lowercase Capital, Menlo Ventures, Microsoft, New Enterprise Associates, Sherpa Capital, Summit Partners, Techstars Ventures, TPG Growth, Tusk Ventures, Valiant Capital Partners, and Wellington Management. Its last raised $1.25 billion in January this year in a round led by SoftBank. The round valued Uber at $48 billion – a significant decline over its peak valuation of close to $70 billion last year.

Uber’s Revival Plan

Uber has been trying to turn a corner this past year. Last year, it was accused of trade secret thefts by Alphabet for self-driving car technology. Alphabet claimed that Uber acquired the technology when it acquired the self-driving truck company Otto. But since Otto’s founder Anthony Levandowski was an ex-Googler and the technology he used to develop Otto was part of Alphabet’s self-driving car technology, Alphabet sued Uber. Earlier this year, Uber agreed to settle with Alphabet by paying $245 million.

It was also in the news relating to several sexual assault cases. While there are several incidents of sexual abuse against Uber’s drivers internationally, within the US alone, 103 Uber drivers have been accused of sexually assaulting or abusing their passengers in the past four years. Uber’s policy forced users into arbitration instead of being allowed to pursue legal action. Recently, Uber modified its policy and is now allowing victims of sexual violence, including riders, drivers and employees, to choose their method of redress of their sexual harassment or assault claims. Victims can choose arbitration, mediation, or open court to settle cases.

Uber is trying hard to change its image in the market. It recently began airing public apologies on TV networks with its CEO Dara Khosrowshahi promising to make the company a better place for its customers and employees.

It will still be a while before Uber still recovers from this past year. The company is now planning to go public in 2019. By then, it hopes to improve its image and financials.

Lyft Remains Uber’s Competition

Meanwhile, Uber’s prime competitor Lyft continues to deliver strong growth. Lyft claims that it has 35% market share in the US, compared with 20% in 2016. According to the eMarketer, Uber riders are expected to grow 18% this year to 48 million, while Lyft is expected to see usage grow 41% to 29.9 million riders.

Like Uber, Lyft too discloses some of its financials. Recently reported results show that its revenues grew 168% over the year for the first quarter. It ended the year with $1 billion in revenues. Lyft did not reveal its profitability figures, but it is still recording losses. It is, however, looking to manage its margins by reducing its spend on sales and marketing expenses.

Lyft has been venture funded so far with $4.3 billion from investors including Capital G, Icahn Enterprises, Rakuten, Coatue Management, Andreessen Horowitz, Founders Fund, Mayfield Fund, FLOODGATE, K9 Ventures, and fbFund. Its last funding round was held in October last year when it raised $1 billion from investors including Alphabet’s Capital G at a valuation of $11 billion. Valuation has increased from $10 billion that it was at, earlier last year. Like Uber, Lyft too is planning to go public. But details of its listing are not known.

Meanwhile, both Uber and Lyft continue to battle with regulatory concerns surrounding the industry. Recently, courts in the European Union ruled that Uber should be regulated like a taxi company and not the information services provider that it categorizes itself as. The ruling will impact Uber’s operations in a few European countries including Poland, Czech Republic, Slovakia, and Romania. In other countries, Uber already follows the transportation authority regulations.

Closer home, Uber and Lyft continue to face legal battles across multiple states. Recently, Hawaii joined in its fight to regulate the ride-sharing industry within the state. Both Uber and Lyft are also facing legal pressures in California where the Supreme Court of California recently made it difficult for these companies to classify its drivers as independent contractors.

Photo Credit: Núcleo Editorial/Flickr.com 

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