Hi friends,
After much anticipation, Uber went public today and began trading on the New York Stock Exchange.
However, I will be staying away from the stock. Unfortunately, I see limited upside from the $80 billion valuation, and any other company would have been bankrupt by now, except that private equity and venture capital investors kept the thing afloat, and now are going to be looking to exit, which will create a lot of selling pressure on the stock.
The Uber business model is not close to profitable, there is plenty of competition, there are a myriad of legal issues with employment laws, and the company is just an app that somehow received an $80 billion valuation based on their gross revenues. They have lost $7 billion over the last two years, and there is no path to profitability, so the house of cards will eventually fall. They have been subsidizing people’s rides by using the capital of the private equity and venture capital firms, and now those firms will cash out by selling their now inflated shares to you. Uber will have to sell shares to raise capital so dilution is coming, as no lender in their right mind would loan Uber money.
I would love to hear differing opinions if they are out there if people are going to be investing in the company.
Take care,
Brian