And Now the UBER IPO...
Similar to Lyft, which I reviewed in a post about a month ago, UBER is losing lots of money in order to grow their business rapidly. Also, as has been well publicized, Lyft is down more than 20% from it's first day valuation. It's Deja Vu all over again to the dot.com days as far as I'm concerned.
Here is a quick analysis of UBER, which recently filed its IPO registration statement. I won't spend a lot of time talking about the business because everyone is pretty familiar with it. The company is global and has several lines of business, including personal mobility (cars, bikes, scooters), meal delivery, freight handling and an autonomous vehicle strategy.
A few highlights from the registration statement worth noting:
Impressive revenue growth - from $3.8B in 2016 to $11.3B in 2018 - 293%
Consistent LOSS from operations of between $3B and $4B
Profitable in 2018, but only because of one time gains from investments
Here's a snapshot of the Company's debt and other contractual obligations. Not much coming due in the next year, but almost $13B in total outstanding, half of which comes due in the next five years which is a little concerning.
Here are a few notes on UBER's cash flow situation, which shows that the Company burned through $2.2B in 2018 ($1.5B in operations and $0.7B in investing activities).
"We currently anticipate that our available cash and cash equivalents and revolving credit facility will be sufficient to meet our operational cash needs for at least the next 12 months. We may need to raise additional capital or incur additional indebtedness to continue to fund our operations in the future or to fund our needs for merger and acquisition activity or other strategic initiatives. Our future capital requirements will depend on many factors including our growth rate, headcount, sales and marketing activities, research and development efforts, capital expenditures, the introduction of new products and offerings, and potential merger and acquisition activity, or other strategic initiatives. Additionally, as our business has grown, our restricted cash balance has increased primarily due to increasing insurance reserves for potential future liabilities, thereby reducing the amount of unrestricted available cash we have to fund our operations."
While this company is very large and growing significantly, my main concern is the path to profitability. I'm not sure it's sustainable for very long, especially if we see a global economic downturn in the next year or two and the debt / equity financing necessary to sustain the business becomes harder to obtain. I think investors have already figured that out in the case of Lyft.
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